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Briefings

Non-tariff barriers

in | by Hugo Dixon

The common market was a big leap forward for trade within Europe. But it did not deliver the Treaty of Rome’s goal of full barrier-free trade. The main reason is the difference between what are called tariff barriers and non-tariff barriers. Non-tariff barriers are rules, regulations and other practices that make it difficult for goods and services to be sold across national frontiers. Examples include rules that cars must have brakes that conform to a specific national standard; that ski instructors must have passed a local exam; that companies wishing to supply the government must be based in its country; or that food must adhere to national hygiene standards.

Many of these practices are justified on the grounds that they are needed to protect health, safety, consumers or the environment. But they are often used to shut out competition. Vested interests benefit; consumers suffer.

Such non-tariff barriers are less visible and more insidious than tariff barriers. So even when tariffs were abolished within the then EEC, a lot of trade got gummed up. There was, therefore, a new drive from the mid-1980s to complete the common market, which was then rechristened the single market. The plan was to sweep away non-tariff barriers. The initiative was spearheaded by Arthur Cockfield, a British commissioner, and strongly backed by Margaret Thatcher. A deadline of end 1992 was set.

How, though, do you sweep away a non-tariff barrier? The answer is that you have to pass regulations. This is one of the ironies of creating the internal market: in order to get rid of national rules that restrict trade, you have to pass new EU ones that open it up.

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A good example is the humble lawnmower. In the early 1990s, when John Major was prime minister, the EU imposed an upper limit on their decibel level. Eurosceptics saw it as an example of Brussels over-reaching itself. This is how Philip Stephens, a Financial Times columnist, tells the story:

Caught off-guard, ministers demanded an investigation. How had it got through? Why had Britain failed to kick up a fuss? Back came Whitehall officials with the story. Yes, there was indeed such a directive, they reported. No, Her Majesty’s Government had not opposed it. Worse, it had voted in favour of the regulation. Even worse, Britain had proposed the directive and subsequently steered its passage through the Council of Ministers!

There was a simple explanation. The Germans, it seemed, had set a national noise limit on lawnmowers to ensure the peace and quiet of that country’s good burghers during the summer cutting season. The problem – and was it coincidental? – was that this excluded imports of the noisier products of British-owned manufacturers. A level playing field within the single market demanded EU regulation that stopped Germany from unfairly locking out the competition. Sure enough, the new, Europe-wide, decibel ceiling put the British producers back in the game.”

Look too at what local and national governments around the EU spend on goods and services. Such “public procurement” is 16% of EU GDP. Most governments would have a bias for awarding contracts to local firms if there wasn’t a rule telling them that they are not allowed to discriminate against companies from other EU nations. This rule is needed not just to give all firms a fair chance to win contracts; it means that governments (and, hence, taxpayers) get a better deal.

You also often need rules to set minimum standards to protect consumers, the environment, health and safety. You can call these rules red tape if you like. But, without some regulations, many markets would stay shut and those that were opened would be subject to a free-for-all which could harm consumers.

Eurosceptics often complain that all our companies have to follow EU rules, even those that don’t export to the EU. But businesses like the fact that there are common product standards across the EU because they don’t have to follow different specifications for different markets. When the Confederation of British Industry surveyed its members in 2013, 52% said common product standards were positive for their business; only 15% said they were negative. If we quit the EU and decided to develop our own product rules, our exporters would be at a disadvantage. They’d have to follow one set of rules at home and another if they wanted to sell to the EU. Then they’d really be fuming about red tape.

This is an excerpt from “The In/Out Question: Why Britain should stay in the EU and fight to make it better” by Hugo Dixon. 

Factchecking by Sam Ashworth-Hayes