European Red Tape Is a Bogus Justification for Brexit

July 19, 2016 11:00 AM

Did the European Union’s ship of state run aground on misleading anecdotes? It would appear so. Red tape is frequently mentioned as one of the main reasons for Brexit. In 2013, for example, the European Commission proposed legislation to ban refillable jugs for olive oil to prevent restaurants from switching virgin oil for cheap alternatives. The widely disseminated proposal was abandoned after a storm of ridicule. In 2012, another legislative proposal called for banning hairdressers from wearing high heels and jewelry. It, too, was scrapped in the face of a hail of derision.

But however much Brussels is reviled for burdensome regulations, especially in the conservative British press, it is primarily up to the national governments to regulate business and ensure that their regulation is competitive. In recent years, individual European countries have actually improved the environment for doing business. Half of the 25 countries in the world where it is easiest to do business are EU members, according to the 2016 World Bank’s Doing Business survey. These are Denmark (3), United Kingdom (6), Sweden (8), Finland (10), Germany (15), Estonia (16), Ireland (17), Lithuania (20), Austria (21), Latvia (22), Portugal (23), and Poland (25). Malta is the lowest-ranked EU country, at 80 (of 189 economies).

Still, UK Prime Minister David Cameron has frequently described Brussels as a huge bureaucracy that needed to be scaled back.  British corporate leaders have complained of heavy regulation and started publishing an annual report on the most egregious red tape burdening businesses. Graeme MacDonald, the CEO of construction equipment maker JCB, one of Britain’s largest manufacturing companies, argues: “What is needed is a lot less red tape. … Some of it is costly for us and, quite frankly, ridiculous. Whether that means renegotiating or exiting [the EU], I don’t think it can carry on as it is. It’s a burden. … It’s easier selling to North America than to Europe sometimes.”1 Some of this criticism is unjustified. An examination of the EU’s record on regulations shows that in practice the EU governs few areas of business activity and that it has a lighter regulatory touch than many other parts of the world, including the United States. Yet the perception of bureaucratic Europe persists.

The European Union has adopted various tools to address the quality and cost to businesses of its legislation. In March 2002, it adopted the “better regulation package,” which introduced the use of impact assessments of new legislation. Since then, more than 1,150 impact assessments have been completed. In 2006, an Impact Assessment Board, a task force composed of European Commission officials, was created. Impact assessments are, however, not based on quantifiable indicators. Their cost is frequently higher than their possible benefits.

At the insistence of the UK government, the Impact Assessment Board was renamed the Regulatory Scrutiny Board, and its composition was changed in 2014. Rather than having nine rotating experts working in various parts of the European bureaucracy, the new board has four permanent members and two independent members, one of whom has an academic background. The Netherlands, the UK and the Czech Republic have advocated a completely independent Regulatory Scrutiny Board. This is just one example of the many ways in which the UK has used its clout to force change in Brussels.

Note

1. Vincenzo Scarpetta, “Cutting Red Tape Must Be at the Heart of Any EU Reform Agenda,” Open Europe, May 18, 2015.