It’s been a long time coming, but after a long period of EU debate, the Brits decided that they will leave the European Union for European entrepreneurs trading. The big question is what will happen when the UK leaves the single market? Will the rules on product safety be subject to major change? Or will the day to day reality more or less stay the same?
The single market is one of the big pillars of the European Union. This concept grants the member states of the European Union free movement of goods, persons, services and capital within this single market1, which means no more high customs tariffs and no more scattered product safety rules – just to name a few. If you comply with relevant EU directives, regulations and related harmonised standards, you’re good to go in all of the member states.
The CE mark
Let’s take safety gloves as an example of Personal Protective Equipment (PPE), as safety requirements for protective gloves are laid down in the PPE Directive. When the product is in compliance with this Directive and its related (harmonised) standards, it gets the mandatory CE mark. Without the CE mark, there is no trading of the product on the EU single market. But what if the UK leaves the EU and the single market? Will their products still be subject to European product safety rules? Or will they draft their own? And what does that mean for the entrepreneurs from the EU importing products to the UK?
First of all, the European product safety rules will continue to apply for at least two more years. After the initial notification of the intent of withdrawal, scheduled for March 2017, there will be a long negotiation period before the UK has actually left the EU. Most experts assess this period will last for a minimum of two years, which means that EU product safety rules will apply until at least March 2019. This process might be delayed even more by the ruling of the Supreme Court. When it upholds the judgement of the High Court, that the UK Government needs approval from Parliament before they can decide to actually leave the EU, it is highly unlikely that Article 50 will be invoked in March 2017 or at all.
Post-single market scenarios
So, the only thing we can say with certainty at this point is that the impact of the Brexit on product safety will not be clear until the relationship between Britain and the EU after their leave has taken its shape. But when the time has come and the UK does leave the European Union, and therefore the Single Market, there are a few possible scenarios.
The UK joins the European Economic Area (EEA) and/or the European Free Trade Association (EFTA)
First of all, the UK can decide to become a member of the European Economic Area and/or European Free Trade Association. This is also referred to as the “Norwegian-model”. The EFTA and the EEA are separate agreements. When solely entering the EFTA the UK has to waive tariffs on goods and services, but does not have to agree on a common policy in relation to trade with third countries. However, the EFTA does negotiate Free Trade Agreements for its members, one of which is the EEA Agreement. You don’t have to join the EEA when you become a member of the EFTA. For example, Switzerland is part of the EFTA but not of the EEA. She has her own bilateral agreements with the EU relating to free trade. So, when the UK decides to only join the EFTA there will be a need for (a lot of) supplementary bilateral agreements to make trading with the European Union possible (see point two). There is a big chance that without opting for the EEA as well the EFTA membership will be vetoed against by the other members.
On the flip side you do have to be an EFTA member when you want to be part of the EEA. Acceptance of the EEA also means accepting the four freedoms, including freedom of goods and persons. Since a major catalyst of the Brexit was the worrying about the freedom of persons this might be an issue for some Brits. However, it would be the best choice it they want to be able to use the single market. The EEA goes beyond regular free trade agreements by extending all EU rights as well as obligations of the single market to the EEA Members.2 The EEA Membership requires national laws on product safety to be replaced with the harmonised European laws on product requirements.3 This would mean that the UK has to implement the PPE Directive into their national law system (which is the case now) and is not allowed to subject the products to her own product laws instead.
What does this mean for the importer?
In the event that the UK joins the EEA the current reality of product trading and the applicable standards will not change all that much in practice. The EU Regulations concerning product safety and PPE will still apply. For example, when importing safety gloves from and to the UK, these products will still have to be compliant with the European standards harmonised by the applicable PPE Directive. When they solely join the EFTA there will be need for complementary bilateral agreements. This will be discussed in the next part of this article.
The UK negotiates a Bilateral Agreement with the EU
Another option is to negotiate a bilateral agreement with the Member States. This is also referred to as the “Swiss-model”. As mentioned above, when a country solely enters the EFTA there will still be need for further negotiations on trade agreements. The UK can negotiate a Bilateral Agreement with the EU where they establish the requirements that have to be met for the trade of goods between the two markets. A well-known example of this arrangement is Switzerland. Since their decision not to join the EU and the EEA, initiated by a referendum in 1992, they have negotiated a number of bilateral agreements to facilitate free trade with the EU.
Although the Bilateral Agreements have led to the adaptation of Swiss legislation on product safety, Switzerland does have her own rules on product safety that impose different requirements on products.4 The EU CE marking is not required in Switzerland, but the manufacturer or importer has to make sure the products are in compliance with the Swiss requirements.5 However, to prevent double conformity assessments the EU and Switzerland signed a Mutual Recognition Agreement (MRA). On the basis of this agreement there is a mutual recognition of the results of conformity assessment related to product safety in particular areas. A committee appointed by the MRA assesses whether the Swiss standards are of the same level as the EU standards and vice versa. When the committee’s assessment is positive, products in compliance with these standards can be freely traded on both markets.6
The above mentioned situation can also be the scenario for the UK if they decide to opt out of the EEA and enter into Bilateral Agreements with the EU to facilitate free trade. On the other hand, this is not something the EU is very fond of, since it results in a widely tangled web of different regimes and agreements between the entities.7 Also, the UK will have to make a lot of concessions on their side and still have to comply with different EU rules, which was one of the big reasons for leaving the EU in the first place.
In this event the CE-marking will not be mandatory anymore for EU products traded on the British market. Besides the CE-marking, the UK does have her own quality mark which sets specific standards. This quality mark is known as the BSI Kitemark. This mark was established in 1906 as the British standard mark for use on tramway rails and has evolved through the years into a proper quality mark that can be seen on hundreds of products. Internationally accredited, the quality mark is widely used and it is likely that, in the event that UK will no longer apply EU standard, the BSI Kitemark will become the UK’s number one quality mark for product safety. However, unlike CE-marking, the BSI Kitemark is an independent mark of quality and not mandatory. It is not government owned and therefore not legally binding. The current BSI Kitemark is thus only a voluntary mark which guarantees safety and quality. This means that traders can also import and trade products without a BSI Kitemark onto the UK market. That said, the products will still have to comply with the British laws on product safety. The current product safety laws of the UK are mainly based on the EU standards and this will only change if the UK government decides to implement new product safety laws.
What does this mean for the importer?
If the UK and EU negotiate a Bilateral Agreement on product safety, the practical consequences for our import of safety gloves depend on the particulars of this agreement. When an importer wants to market a product on the UK market it will most likely have to comply with the UK product standards for the particular product. Currently the UK national product safety laws are based on the EU Directives, so unless they decide to draft new laws, the standards will be more or less the same. The UK might also give more credit to her BSI Kitemark in this case as well. However, currently this quality mark is not mandatory, which means products do not have to bear this mark to be eligible for trade on the UK market. When UK manufacturers want to export their products to the EU single market they will still have to comply with the applicable EU Directives and obtain a CE-marking.
If the UK and EU also agree on an MRA things will be a bit easier. In this case a double conformity assessment is not necessary. When a product is in compliance with EU standards it will be eligible to be traded on the UK market and vice versa. This will obviously only apply to products of which the standards are positively assessed by the appointed committee.
The UK trades solely under the World Trade Organization (WTO) rules
In the event that the UK decides not to join EEA/EFTA and doesn’t reach any bilateral agreements on trade they can choose to trade under the WTO rules. The WTO has 161 members comprising of all major economies and most minor ones. Under these rules each member has to apply the most favourable tariff and rules to every other member trading on their territory.8 The UK will need unanimous agreement from all the WTO’s members for its new “schedule” to set baselines for future trade deals. However, recently there has been some talk about certain WTO members blocking a new settlement of UK in WTO.9
With regard to product safety rules, the WTO adopted the Technical Barriers to Trade Agreement (TBT). This agreement tries to ensure that technical regulations and standards on product safety do not create unnecessary obstacles. Members are, however, free to adopt standards they deem appropriate to protect health and safety. They are also allowed to take necessary measures to make sure these standards are met.10 This means that when WTO members want to trade their products on the EU market they still have to comply with the European standards.
What does this mean for the importer?
Under the TBT national product safety rules cannot create unnecessary obstacles. However, when the standards pass this test (which is the case for EU standards) countries can apply their own product safety standards to imported goods. When importing goods from the UK onto the EU market the products will still have to comply with the CE-marking. On the other hand, when importing goods onto the UK market the CE-marking will no longer have any value. The importers will have to comply with the UK rules on product safety. For now these rules are based on the EU Directives, which means the standards will be more or less the same. However, the UK can decide to issue new UK laws on product safety or decide to apply a national quality mark. In that case the imported goods will have to comply with those rules and standards before they can be legally traded on the UK market.
There is still a long way to go until Brexit is reality. Until then the regulatory landscape on product safety rules and standards will not change. We can only guess how the relations between the UK and the EU will turn out after the long period of negotiations. All the possible scenarios have a negative side for the British. For European traders it would be easier if they joined the EEA, which would keep the day to day reality more or less the same. Bilateral agreements and trading under WTO rules will change the rules a bit more. In this scenario it’s important what agreements there will be between the EU and the UK and how the UK national product laws will evolve.
All in all, European businesses can keep trading as usual for now, but they’ll definitely have to prepare for some changes in the future. As to what those changes will be, it’s only a matter of time until we find out.