What I Told The European Affairs Committee

With these points mind, here are some responses to five of the specific questions asked by the Committee.

Are current arrangements for parliamentary scrutiny of UK-EU relations adequate for scrutinising dynamic alignment? What would an ideal system for parliamentary scrutiny of UK dynamic alignment comprise?

In my view, there is a much more fundamental issue here: it is hard to see how dynamic alignment could ever be consistent with the outcome of the 2016 referendum. Dynamic alignment is “rule taking”, whereas Brexit was about “taking back control”.
Ministers have argued that adopting EU rules only in sectors that benefit the UK is using post-Brexit sovereignty in the UK's interest. Dynamic alignment can be spun as a benign arrangement where the UK voluntarily keeps its laws, standards, and regulations in step with those of the EU.
Nonetheless, once that commitment has been made, the UK government will have no formal say in how these rules are determined and how they might change over time. Rules will inevitably be designed in the interests of the most powerful EU members, which may not coincide with our own, and using a precautionary approach which stifles innovation and growth.
The only way to regain control would then be to end the agreement, which will have additional costs including renewed uncertainty and (potentially) exit fees.
There are also valid questions over the parliamentary process for incorporating EU rules into UK law. The proposed adoption of “Henry VIII provisions” to amend primary legislation using secondary legislation is likely to widen the “democratic deficit” created by having domestic rules made by a foreign authority.
There is no easy answer to this, other than not to go down this route in the first place. But it is clear that the current trajectory will not allow sufficient parliamentary scrutiny.
At the very least, parliament should insist on a proper cost-benefit analysis of the new arrangements. For example, the government’s claim of a £5.1 billion boost to the economy from the UK-EU Sanitary and Phytosanitary (SPS) agreement (covering food and agricultural safety) appears to be based on figures from an outside lobby group rather than a formal and transparent impact assessment by officials.

What impact are the three new UK-EU agreements that are currently in prospect likely to have on UK GDP? (the three agreements being on: the creation of a Common Sanitary and Phytosanitary (SPS) Area; the linkage of the UK and EU Emissions Trading Schemes (ETSs); and UK participation in the EU’s internal electricity market) [Taken together with…] To what extent are the drawbacks and benefits of these prospective agreements for the UK, including with respect to GDP, likely to depend on their precise terms—for example, with respect to the scope and operation of, and exemptions from, dynamic alignment?

The UK government has recognised some of the political concerns raised above. Nonetheless, Ministers have argued that the proposed approach of sector-specific alignment is a pragmatic compromise which balances these political concerns against the economic benefits of closer ties with the EU.
There are several weaknesses in this argument.
First, the economic benefits of “dynamic alignment” are small. Again taking the SPS agreement as an example, the reality is that the UK has never exported a large amount of food to the EU and this is unlikely to change in future. Despite this, the SPS rules will apply to all UK producers, whether they sell into the EU or (more) likely not.
Even the UK government’s own numbers are unimpressive. The government has suggested that the SPS agreement and the agreement to link the UK and EU Emissions Trading Schemes (ETSs) will together be worth £9 billion a year to the UK economy by 2040. That is a small gain and a long way away.
Of course, every little helps. But these potential benefits also need to be set against the costs.
The loss of regulatory independence itself has disadvantages. The financial services sector is a good example here. The City of London was originally sceptical about Brexit but is now a champion of the benefits of smarter regulation. Susan Langley, the new Mayor, has said that the prospect of realigning financial rules with the EU has passed and warned against linking regulations to any single jurisdiction.
Again, the UK government does appear to recognise that regularity alignment should have limits. Ministers have emphasised that it is better for the UK to take a different path in some sectors, including AI. But once the UK sets down the road of realignment, it will be hard to stop, especially under pressure from the EU. There already appears to be some wobbling over financial services.
Dynamic realignment with EU rules and regulations could also create new uncertainties for UK businesses, most of whom have now adapted to the post-Brexit arrangements. Some might be more confident that they could continue to sell to the EU with minimal frictions. However, the rules could change over time in ways that are both uncertain and not necessarily in the interests of British firms (or the wider economy).
The wide and potentially shifting range of exemptions and carve outs will be a new source of uncertainty too.

Should the UK make a financial contribution to the EU or EU policies as part of its dynamic alignment agreements? Is there a level of contribution that would mean that such agreements do not represent value-for-money for the UK?

Unfortunately, the UK will have little choice – if any. The EU’s long-established view is that the granting of market access to a third country is conditional on a “fair financial contribution reflecting the benefits derived from such access”.
This was set out most recently in the context of the UK’s participation in the EU’s internal electricity market and the Erasmus scheme.
In other words, in return for the right to buy more energy from the EU and the obligation to let more young people from the EU work and study here, the UK will have to pay in to EU cohesion funds – effectively providing development aid to poorer EU countries.
This is not how international trade normally works and should not be acceptable to the UK. Canada, for example, does not pay tribute to the United States in return for the mutual benefits of trade with its larger neighbour. These contributions also crosses another Brexit “red line” – taking back control of money.
These concerns are reinforced by the reality that the EU is determined to extract every possible concession from the UK. Viewed one way, the EU is simply sending a clear signal that countries cannot “cherry pick” particular parts of the union. Viewed more cynically, some EU nations want to penalise the UK for leaving, “pour encourager les autres”, even if this also hurts EU businesses and households.
Consistent with this, the UK has been forced to accept a bad deal on Erasmus+ and is being pressured to sign up to a youth mobility scheme which will also be on relatively unfavourable terms. The EU’s reluctance to do deals in other areas where there should be mutual benefits – such as chemicals – suggest that any further alignments would come with even bigger price tags.
In principle, these agreements might still represent value-for-money for the UK if the contributions are low enough. But these contributions would immediately start to chip away at any net gains, whereas the benefits are relatively uncertain.

What are the implications of the three prospective agreements with the EU, and of the Government’s general policy of dynamic alignment with the bloc, for the UK’s trade relations with countries outside the EU—with respect especially to the United States, and the UK’s membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)?

This will depend on the detail of each deal. However, the requirement to apply EU stands to all UK production mean that the more sectors are covered by dynamic alignment, the harder it will be to realise the Brexit benefits of lower barriers to trade with the rest of the world. Momentum will certainly be lost in promising areas such as a closer economic ties with CANZUK and the rest of the Commonwealth.
The UK also risks being seen as an unreliable partner if it has to renegotiate existing trade deals, or try to do so in future If UK rules change as a result of dynamic realignment.
The lack of bandwidth in the civil service is a concern too. Substantial resources are being diverted to the UK-EU reset which could be better deployed in taking advantage of the many Brexit freedoms in trade and regulatory policies.

In short, the proposed UK-EU reset is an unsatisfactory “half-way house” and – even more importantly – a side show compared to the real challenges facing the country. The patchy adoption of “dynamic alignment”, or more accurately “rule taking”, highlights the flaws in the government’s approach, both political and economic.