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The Tory Government Has Fallen for the EU's Nonsensical Demands on Social and Employment Laws

July 17, 2018 in Economics

By Ryan Bourne

Ryan Bourne

Amid Brexiteer fury about the government’s Chequers
negotiation proposal, one important aspect seems to be getting
little attention. The UK government has capitulated to an EU demand
on social and employment laws, and the detail of this concession
will need to be scrutinised very closely.

The Conservatives pledged for a decade to reverse the British
adoption of the EU’s “Social Chapter”, largely on
the basis that social and employment regulation has nothing, per
se, to do with liberalising trade.

The 2005 and 2010 election manifestos promised to repatriate
these powers. The Fresh Start project, headed up by the now cabinet
minister Andrea Leadsom, argued in 2012 that David Cameron’s
renegotiation should demand the return of these competences to all
member states, with a second-best outcome of a simple UK

Now, on the cusp of Brexit, the UK government has apparently
ceded to the EU’s call for a “non-regression”
clause in these areas in any future trading agreement. According to
the Chequers statement, this would bind the UK against letting
social and employment standards fall below their current

As the white paper itself acknowledges, these areas are
unrelated to ensuring open and fair markets.

The UK government has
capitulated to an EU demand on social and employment laws, and the
detail of this concession will need to be scrutinized very

Many trade agreements include provisions that countries meet
simpler core International Labor Organisation standards. Others,
such as the US-Australia deal, commit very loosely to not watering
down laws, but do so using non-committal language.

However, given that the UK has been harmonised to EU rules for
so long, one worries how tough a “non-regression”
clause the EU would desire — and what enforcement would

Setting robust restrictions on policy freedoms concerning agency
worker rights, maximum working times, parental leave, and
collective redundancies within a trade agreement would be

By relating these issues to trade, the UK government has
implicitly endorsed the faulty continental “race to the
bottom” worldview.

French politicians, notably, seem to believe a level playing
field is desirable. In this view, labour market regulatory
harmonisation helps to protect countries with high standards from a
“competitive disadvantage” from those with low
standards, preventing the desire for footloose capital to flee to

regulation regions, and creating competitive pressure for all
countries to lower standards over time.

The fundamental problem with this argument has always been that
it is completely evidence-free.

At a global level, it is clearly not the case that capital flows
to the most deregulated nations. The economist Richard Stern,
summarising the empirical literature, argues that trade patterns
appear little affected by labour standards, while foreign direct
investment is inversely correlated with it.

The reason …read more

Source: OP-EDS

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