48 TheEconomistFebruary 1st 2020
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ritain’s departurefrom the eu, says
Sir Bernard Jenkin, a Conservative mp,
reminds him of an experiment his grandfa-
ther once carried out on a pet pike. He put a
glass wall in the middle of the fish’s tank,
thus halving its swimming space. After
ramming the glass, “thunk, thunk” for a
while, the fish adapted to its diminished
quarters. But when the wall was removed,
it continued making tight circles in half of
the tank: it never grasped that its freedom
had been restored.
On January 31st Britain leaves the eu. It
goes into a sort of limbo—a transition per-
iod—until the end of 2020, when in dozens
of areas, from trade, migration, environ-
mental rules and farming to financial ser-
vices, data policy, regional subsidies and
state aid, the country’s freedom to run its
own affairs will be constrained only by its
ambitions to do deals with other countries.
The big question, says Sir Bernard, an en-
thusiastic Brexiter, is whether it can re-
member how to roam.
Boris Johnson, the prime minister, isbent on taking full advantage. There will be
crowd-pleasing changes—taking back con-
trol of the vatregime will allow the Trea-
sury to remove the levy on tampons, for in-
stance—and weightier divergences. Earlier
this month Sajid Javid, the chancellor of
the exchequer, made clear that there will be
no alignment with eu regulations once
Britain is out of the single market and cus-
toms union, adding that there would be
winners and losers.
The riposte from Brussels to Mr Javid’s
remarks was swift. Ursula von der Leyen,
president of the European Commission, re-
peated that greater regulatory divergence
would necessarily mean a more distant
trading partnership with the eu. The gov-
ernment’s own economic analysis of Brexit
last year put the long-term loss in gdpper
person of a close relationship (like Nor-
way’s) at some 1.4%, against a loss of 4.9%
for a more distant one. The difference is a
proxy for the cost of regulatory divergence.
British manufacturers protested. The
car and aerospace industries, chemicalsand pharmaceuticals firms, the Confedera-
tion of British Industry (cbi) and Unite, the
biggest trade union, all talked of the ad-
verse consequences of divergence. Minis-
terial promises only to diverge when that is
in Britain’s interests do not much reassure
them. The only way to avoid customs, rules
of origin and regulatory border checks is to
make legally binding commitments to ob-
serve all current and future eurules, which
the government has rejected.
Some 80% of the auto industry’s output
is exported, and over half those exports go
to the eu. Regulatory divergence would
mean cars (and car parts) being subject to
compliance checks in both directions, in-
creasing costs and delays. Some 60% of the
chemicals industry’s output goes to the eu.
But there is bound to be divergence.
Regulation is the expression of public atti-
tudes to business and the state; since those
are different all over the world, Britain’s
rules will become increasingly British. And
there could be benefits as well as costs.
Regulation in Britain tends to be based
on principles, rather than prescription; the
country’s common-law system builds on it
over time. European regulation, by con-
trast, is more codified, which leads to a lot
of prescriptive detail. The very word “direc-
tive” strikes fear into executives, says Hele-
na Morrissey, a City financier. Financial
firms get snarled up in detailed eurules.
The cost to the British asset-management
industry of obeying the revised Markets inBrexit and regulationInto the wide blue yonder
Britain will diverge from euregulation. There will be costs, in terms of access to
the eumarket, but there will be benefits tooBritain
49 Euro-myths
50 FisheriesafterBrexit
51 ImmigrationafterBrexit
51 DoingtradedealsAlso in this section52 Bagehot: The English problem