The writer is an international lawyer and former EU official
Europeans are taking comfort from how much the UK has lost in the Brexit negotiations. The UK has ended up fully opening its market to all EU goods, including agriculture. And it has done so in exchange for roughly the same access to the EU services market that the bloc has granted to countries on the other side of the world, which are not even major exporters of services, such as Vietnam.
But the UK’s losses in the negotiations are not European wins. They are a blow for the UK, but they damage the EU, too.
For the EU, Brexit was never just about trade but about international strength. That is why, when presenting the deal, Ursula von der Leyen, European Commission president, went out of her way to insist that the EU is still “one of the giants”, and a “great power” with “the largest single market” in the world.
In the negotiations, the UK’s flat refusal to become a rule-taker or recognise the European Court of Justice collided with the EU’s insistence on protecting the integrity of the single market at all costs.
Instead of recognising that regulation is currently identical on both sides of the channel, which would allow for the mutual recognition of each other’s rules unless the UK decides to diverge from them, this barely features in the Brexit trade deal at all.
When it does, it is in the form of a purely defensive mechanism setting out how regulatory retaliation might occur. These ‘“level playing field” rules set out a complex arbitration and rebalancing system to prevent the UK lowering its regulatory standards. The purpose is clear: to protect the EU from a more competitive UK.
But for the EU to compete successfully with the UK will require much more than an ability to retaliate.
Only one EU member state, Denmark, scores better than the UK on the ease of doing business, according to the World Bank’s rankings. In fact, European companies still find themselves curtailed by multiple barriers in their own single market.
According to reports from the Commission itself, there remain 83 types of trade obstacle, both at general and sectoral level. And more than 40 legislative measures that are needed to complete the single market remain unfinished — a quarter of a century after it was created.
European competitiveness will not depend on protectionism towards the UK, but on whether the EU can truly guarantee that European companies can do business seamlessly in 27 countries, both digitally and non-digitally, at sufficient scale.
Part of what needs to improve is the regulatory responsiveness of the EU to a fast-changing world. Something as simple as making all public procurement throughout Europe electronic is taking years of legislation. And because there are no bloc-wide rules on whether gig workers are employees, national courts are taking widely divergent positions. Even recent flagship policies on green energy and digital services are riddled with procedural rules rather than long-term strategic measures.
Brexit has damaged the EU at a time when Europe is already handling an internal existential threat to democratic standards and the rule of law from Poland and Hungary. But the shock of Brexit can also serve as a powerful catalyst for the EU to step out of its regulatory comfort zone and become an accelerator of European businesses, not just a regulator of them.
For that to happen, the EU will need to focus less on preventing the UK becoming a competitive threat — even as it remains vigilant against unjustified regulatory arbitrage. Instead, it needs to react to that competition by working more directly with member states and businesses to support growth. The conventional wisdom is that, for the EU to prosper, the UK has to fail. But perhaps some challenging competition from the UK is exactly what the EU needs.