Regulatory alignment or regulatory divergence have become the short hand for describing Britain’s options for its future relationship with the European Union after Brexit. The Irish Border will define how Britain’s policies overlap with or differ from the EU27. Rapidly changing models of international political economy ensure this is a worldwide and not only a European question.
This global aspect is best appreciated by examining how Brexit relates to Donald Trump’s administration’s radical deregulation agenda. Alongside headline decisions such as cancellation of the trans-Pacific and trans-Atlantic trade agreements and withdrawal from the Paris climate accord has gone a comprehensive undoing of the regulatory framework applying to US energy, labour, financial services and many other sectors.
It goes well beyond rolling back the Obama administration’s domestic agenda to affect decades of work by bodies such as the federal Environmental Protection Agency. Trump’s cabinet, the wealthiest in US history, consists largely of former chief executives of major corporations. Their downline departmental appointments are charged with dismantling regulations which the more assiduous US media argue will be the administration’s major long-term impact.
Already Wall Street attributes improved US prospects for growth and employment and greater investment confidence to this effort, but at a cost of more precarious and lower-paid jobs and a far more permissive regime for capital. Trump’s tax changes multiply social inequalities which he justifies by their trickle-down effects and greater profitability. Plutocracy outweighs populism in this achieved agenda.
Mercantilist US
Such radical regulatory change in the world’s largest economy affects not only its competitive position under Trump’s more mercantilist US economic policy but rolls over into its attitudes to future trade deals with the UK after Brexit. Agreeing them is a proclaimed priority for the British and US governments.
What they would mean in practice was spelled out by billionaire investor Wilbur Ross, now the US commerce secretary, speaking to the Confederation of British Industry in November. He said the UK should avoid adhering too closely to EU regulatory standards if it wants to do a deal with the US. He mentioned chlorine-washed chickens and genetically modified food as examples of the EU’s failure to accept US scientific safety standards, while financial services passporting and digital regulations are also major issues. The US wants greater access to EU “standards”, although the Trump administration would prefer to negotiate bilaterally rather than through Brussels.
Ross’s blunt warning to the British government highlights what is at stake in these regulatory battles. Brexit and the wider shifts of policy concerning a more open or closed political economy of which it is a part, reveal the extent to which the EU’s single market for internal trade and customs union for external trade incorporate different socio-economic models behind their highly technical facade.
Much is still left to domestic regulation, but liberal market globalisation since the 1980s has substantially narrowed the gaps between standards at national, EU, other regional and global levels. Although these standards became part of political argument between liberal, left and green positions over trade deals and EU integration, such geopolitical and geoeconomic shocks bring them home to a wider audience of citizens.
Social dumping
Britain’s choices about whether to stay close to the EU or diverge from it in the second phase of negotiations this year involve decisions on which socio-economic model it prefers. Ardent Brexiteers want to complete the Thatcher revolution of deregulation, introduce a cheap food policy to compensate for lower incomes, liberate the UK as a free trading entity like Singapore and scale down and back the welfare state. It is a race to the bottom based on social dumping to create a low regulation tax haven in the UK, of benefit only to an already privileged elite, say their critics.
These UK alternatives echo the US debate on Trump’s policies. Their coincidence reveals a deeper change in world politics, since “the West”, based so much on Anglo-American open liberal values, is now fractured and weakened by their implosion in these two major states. Can that coherence be re-established around a new EU model with a greater social and strategic commitment? Or do we face a more multipolar future in world politics?
Whichever way it goes, the key axis of regulatory alignment will run along the Border. The radical Brexiteer model contradicts and cannot be reconciled with an open Border for these global reasons. If the radicals win this political and ideological battle in Britain, Ireland too faces large political choices on which way to turn.
pegillespie@gmail.com