Internal Market Act 2020: position paper

Annex: International comparators

1. Compared to other countries, the UK IMA affords its constituent units less regulatory autonomy in shaping local market regulations than is the case in, for example, Switzerland, Australia and Canada.

2. The IMA is also noticeable for the absence of meaningful consent provisions, in either its development, implementation or operation. In contrast, all Australia’s states and territories voluntarily signed the Mutual Recognition Act (MRA) in 1992 after participating in its development. The MRA allowed for the recognition of regulatory standards regarding goods and occupations across Australia.^[28]

3. Similarly, in Canada, the federal, provincial and territorial governments signed the Canadian Free Trade Agreement (CFTA) in 2017 after renegotiating the previous Act, the Agreement on Internal Trade (AIT).^[29]

4. Switzerland’s Internal Market Act was based on the same principles as the EU. The Act, signed in 1995, was adopted to allow for compliance with the EU Single Market. Switzerland aligned the Act with the Cassis de Dijon principle allowing for free movement of goods and services among the cantons.^[30] Swiss cantons participated in the development of the Act, given that, under the Swiss constitution, they are granted powers “organise their own affairs” and they must be consulted on any federal policy.^[31] Cantons may introduce exemptions if they can be justified as proportionate, are necessary to “safeguard overriding public interests”, and the exception applies equally to local and non-local suppliers.^[32]

5. Regarding the management of exceptions or derogations to the general application of mutual recognition and non-discrimination principles, other countries provide a broader list of possible exceptions than that provided for under the IMA. Under the Australian MRA for example, exceptions can be granted when a state law is deemed necessary for public health and safety or for environmental reasons. There are permanent exemptions of laws relating to goods that are included in schedule 2 of the Act which were agreed by all the Australian parties.^[33]

6. The state or territory can apply to the Commonwealth to seek an exemption for mutual recognition of a good or class of goods when it is necessary for environmental reasons or public health and safety. This exemption can last up to 12 months while a decision is reached on whether a permanent exemption, common minimum standards or mutual recognition is most appropriate.^[34] The states or territories can also refer a question about the standards applicable to a good to the relevant Ministerial Council.^[35] The Ministerial Councils include Commonwealth, state and territory ministers and, importantly, decisions are made by consensus.^[36]

7. Federal and provincial governments were able to specify a list of exemptions to which the Canadian Free Trade Act does not apply. Parties can remove exemptions, but they cannot add new ones.^[37] The CFTA allows parties to adopt measures that are inconsistent with the Act if it meets a legitimate objective and does not restrict trade more than necessary. Legitimate objectives include, but are not limited to, environmental protection (including climate change mitigations), customer protection, and plant and human health.^[38] The CFTA established the Regulatory Reconciliation and Cooperation Table (RCT) which aims to align regulatory frameworks between participating governments through mutual recognition or harmonisation. Parties can opt out of negotiations on a particular regulatory barrier if they ‘determine that reconciliation is not a desirable option for their jurisdiction’.^[39]

8. Spain illustrates the deficiencies of a top-down approach where buy-in on the design and implementation of an internal market regime is not secured. Madrid aimed to establish a greater version of mutual recognition than many other multi-level states through the Guarantee Law of the Unity of the Market (LGMU) in 2013.^[40] The law was based on the principles of mutual recognition and non-discrimination to address perceived “fragmentation” in the Spanish internal market.^[41] The LGMU offered no provision for autonomous regions to apply for an exemption to the “region of origin” rule which established absolute mutual recognition across Spain.^[42] The Act was subject to challenges under the Spanish Constitutional Court by the regional Parliament of Catalonia, and by the Executive of Andalusia.^[43]

9. In three rulings in 2017, the court declared numerous provisions of the Act unconstitutional including the “region of origin” rule and the “principle of national effectiveness” under the under the argument that it breached provisions in the constitution regarding regional autonomy.^[44] Now, mutual recognition only applies in Spain under strict circumstances if the Spanish government can demonstrate a specific sector where market fragmentation is a barrier.^[45]

10. On monitoring and implementation of regimes, both Australia and Canada afford greater autonomy to their constituent territories than is possible under the IMA. The Australian MRA is monitored and reported on in tandem with the Trans-Tasman Mutual Recognition Arrangement (TTMRA). The Productivity Commission carries out periodic reviews to assess the effectiveness of the Acts.^[46] The review includes consultation with state and territory governments, industry bodies and professional bodies. The Cross Jurisdictional Review Forum (CJRF) is an interjurisdictional committee who are tasked with commenting on the findings of these reviews, and where necessary implementing them.^[47]

11. Under the CFTA in Canada, the Ministerial Committee on Internal Trade was mandated to supervise the implementation of the Act, the resolution of disputes linked to the Act, and the oversight of the numerous working groups under CFTA. It is comprised of representatives from the 14 Parties and has an annually rotating chair. Decisions are made on the basis of consensus.^[48]