Brexit trade deal negotiations and labour standards
Following Brexit in March 2019, the UK will be effectively a “third country” for purposes of access to the European Union’s single market, in all likelihood facing some significant additional tariff (and non-tariff) barriers. During a further “transition” period lasting until December 2020, the UK will have the right to negotiate new trade deals with other non-EU states, while simultaneously seeking a comprehensive free trade agreement of its own with the EU. A Canada-style FTA (CETA) is the most likely outcome of these negotiations.
While securing labour standards and decent work comprise a separate chapter (no. 23) of CETA, it also recognizes “the right of each Party to set its labour priorities, to establish its levels of labour protection and to adopt or modify its laws and policies accordingly”. Such FTAs, involving countries at roughly similar levels of trade union rights, preserve “the right to regulate” of both partners and are “voluntary in nature, with no binding outcome”. Where countries have divergent standards, FTAs appear even less protective.
Paradoxically, however, fears of regulatory regime competition from a post-Brexit Britain are uppermost in the minds of Europe’s leaders. A future UK/EU trade deal according to Commission documentation must ensure a “level playing field” in terms of competition and state aid, and encompass “safeguards against unfair competitive advantages through, inter alia, fiscal, social and environmental dumping”. While accepting that a post-Brexit Britain would have “regulatory autonomy” in the future, the Commission is also seeking to limit that autonomy via “non-regression clauses” that will attempt to prohibit the dilution of the existing standards below pre-Brexit levels. Thus, specific “sanctions” and “cooperation procedures” to minimise divergences and prevent disputes in the future are foreseen.
With negotiations on the future trading relationship between the UK and the EU about to commence, FTA regulatory questions will determine the ultimate shape of any Brexit deal. The UK minister responsible for negotiating Brexit, David Davis, has reiterated that the UK is not seeking an “Anglo-Saxon race to the bottom” in environmental and labour standards. Yet such assurances are contradicted by internal government policy proposals referring to “maximizing regulatory opportunities” to boost the UK economy following Brexit, specifically mentioning removing employment and labour protections. Indeed, new trade deals offer opportunities to foreign parties to leverage significant concessions. Here, regulatory issues, particularly with regard to labour standards, may be especially vulnerable in a context of weak regional and global governance.