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Not Pretty: Brexit and Cosmetics

  • September 20, 2018

The case for Brexit has three different, if overlapping, versions: first, that the UK, as a matter of principle, needs total control over its own laws (especially those on immigration); second, that the benefits of bilateral trade agreements with non-EU countries outweigh the benefits of remaining within the EU’s trade and customs framework; and third, that excessive European regulation has stifled the British economy.

There are difficulties with these views. As previously noted in this blog, any trade agreement involves giving up control over national rules, and Brexiteers are not arguing against trade agreements in general (just the opposite in fact).

The second argument comes up against the strong correlation between trade opportunities and physical closeness. The UK trades more with the Republic of Ireland (next door, 35th largest economy in the world) than it does with China (8000 kilometres away, 2th largest economy in the world).

The third argument needs to explain why the UK is uniquely inhibited by regulation while other more successful EU economies are not, and why the benefits of deregulation or removal of state aid rules obviously outweigh the benefits of single market membership. It is fair to say that a convincing explanation has not been forthcoming.

Some of these problems could be solved if the UK stays in the Single Market and/or the Customs Union, but it is currently not clear if this will happen, and on what terms.

Cosmetics and personal care is a successful industry in the UK, and a significant part of that success is connected with EU trade. 65% of production, just under 3 billion euros worth, is exported to the EU. UK consumers also benefit from a similar amount of imported cosmetics. As for all exporters and importers of goods, a form of Brexit which imposes new customs and trade barriers will have very negative impacts in terms of cost, delays, bureaucracy and the disruption of supply chains.

The current position of Theresa May’s government is that the UK should stay in the single market for goods and share a ‘common rule book’ with the EU. But this is really just a recognition of reality for those industries, like cosmetics, which are currently subject to harmonised EU regulation. UK exporters will need to comply with the rules of their biggest market anyway, and it often makes sense to follow the regulations of large markets – the so-called California effect – even if they are strict, because this will minimize the overall cost of regulatory compliance.  Exporters to the UK will however be concerned that post Brexit regulatory divergence can only push up costs for business and consumers alike.

Of course, the UK has chosen to give up its vote on the cosmetics regulation, and all other rules. That is a pity for the UK, but also a pity for the EU. Pragmatism and a degree of scepticism are qualities sometimes lacking in Brussels. The UK could usually be relied on to provide them. This is not simply the lament of an industry that fears disproportionate regulation (although I won’t deny that this is a concern). More than that, a bit more constructive scepticism overall might spare the EU some of its errors and excesses.

Linked to the idea of over- regulation, some Brexiteers wish to reduce ‘red tape’, or regulatory cost and burden. But for industries like cosmetics, this will probably fail. One of the advantages of EU harmonisation is ‘one stop shopping’, meaning the removal of the need to get go through certain regulatory procedures in each and every EU market. The EU cosmetics regulation exploits this advantage to the full – one ‘Responsible Person’, one product notification portal (CPNP), one Product Information File, and with all these ‘ones’ a much higher numeral of saved compliance costs. Outside the EU or the single market, the UK will probably need its own version of these things and more, as well as a means of complying with EU requirements. The same applies for many other industries. This will be replication, not reduction, of burden and cost.

Someone once remarked that the EU consists of small countries, and of countries which do not yet know they are small. There is much to admire and love about the UK, a few things to detest, and some things which no doubt could be improved. This is true of every other country in the democratic world. Extraordinary things happened in the past, (industrial revolutions, scientific discoveries, exploration, the empire, victorious wars), but in more recent years, the UK has followed something like the statistical phenomenon of regression to the mean. It’s a normal country. It’s not so exceptional. That’s nothing to regret. It really isn’t. The worst error of the Brexiteers is to think that being rich, free, influential, admired and on the whole, happy*, is not enough.

*The World Happiness Report currently ranks the UK 19th happiest country in the world. Not bad.

John Chave, Director General, Cosmetics Europe

 

For more information on Cosmetics Europe position on Brexit, please click here.

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