Friday, May 22, 2020

No, Brexit Won’t Free the U.K. From EU Regulations

British industries from aerospace to telecommunications still need to follow Brussels’s rules to retain access to vital European markets

By Anu Bradford. She is a professor at Columbia Law School and the author of “The Brussels Effect: How the European Union Rules the World.” One economic concept it mentions is "economies of scale." Excerpts:
"EU consumers currently buy almost half of what the U.K. exports, and the EU is a top export destination for many British industries—including aerospace, automobiles, chemicals, financial services, food manufacturing, pharmaceuticals and telecommunications. So all of these industries will need to remain closely aligned with EU regulations to preserve their access to the European market"

"The EU doesn’t even need the British government to commit to a regulatory alignment as part of any future trade deal between Brussels and London. All the EU needs is to demand that companies doing business in the union abide by its rules. Global companies often voluntarily standardize their operations around the most stringent regulatory standard out there—frequently the EU standard—since complying with that standard will typically ensure access to all markets. Economies of scale and other benefits of uniform production make it unlikely that these firms would set up two production lines, one for the EU and another for the rest of the world.

Even multinationals and U.S. companies that benefit from a much larger and less regulated home market often adjust their global business practices to EU rules. Facebook, Google and Microsoft have global privacy policies written with Brussels in mind. Twitter and YouTube have echoed the EU’s definition of hate speech globally, pledging to delete material on their platforms that the EU would deem unacceptable even when such speech might be protected by the U.S. First Amendment."

"CHS Inc., the giant U.S. farm cooperative, has refused to sell seeds or buy grain from U.S. farmers if they contain traits of genetically modified organisms banned in the EU."

"Mr. Johnson’s government will also wind up continuing to emulate many of the EU rules it most despised, including those on data privacy. Pro-Brexit voices have long criticized the EU’s data-protection rules for impeding innovation and undermining British firms’ competitiveness. But the EU’s General Data Protection Regulation will set the terms moving forward, or data flows between the U.K. and the EU will halt."

"Ironically, Brexit will probably strengthen many EU regulations, leaving U.K. companies to face an even more heavily regulated marketplace in the coming years. London will no longer have a say over EU regulations, removing an important pro-market voice from the table where those regulations are written."

Economies of Scale (Increasing Returns to Scale) = A situation in which long-run average total cost declines as the firm increases its level of output. The percentage increase in Q is greater than the percentage increase in TC.

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