I've seen this criticism of the mooted proposal on level-playing field a lot - that "managed divergence" enforced with tariffs is a recipe for instability.

A valid point in theory, but much depends on the detail of what such a proposal would actually look like. /1 https://twitter.com/Gilesyb/status/1275012990111268866

Essentially, this question of stability boils down in large part to what the substantive commitments actually are.

Where is the bar for "regression" or "divergence", over which retaliatory EU tariffs would be applied? And is this a bar that the UK is likely to want to breach? /2

It's really not as simple as "you change your laws, we whack you with tariffs":

- It wouldn't apply to all laws - just LPF, so not product standards etc
- It might not necessarily be triggered by "change" alone (if it did that would be very one-sided) /3

As @Sime0nStylites points out here, intention at the outset matters. So the question then is whether the UK intends to "regress" or "diverge". And that fundamentally depends on what we are actually signing up to /4 https://twitter.com/Sime0nStylites/status/1275013812496850944

"We'll put tariffs on you if you regress on labour and environment" doesn't necessarily cause an unstable relationship.

The UK is already proposing limited non-regression clauses, and says it doesn't want to regress (caveat: "regression" will need to be defined). /5

But "we'll put tariffs on you if we decide you're not dynamically aligning on state aid" is another matter.

Better for both sides than No Deal (which means all the tariffs on day one whether or not we diverge). But this, unlike example above, *is* recipe for instability. /6

Yes, this "tariffs if you break the rules" idea is ultimately how dispute settlement in trade agreements works anyway. But it would be more stable if *combined* with a compromise on the substance of LPF. That way, the threat of tariffs would not need to be used in practice. /7

By the way, this idea is not new and has been kicking around in think-tank world for months. I wrote about it for the Telegraph back in February.

Note 3rd sentence - "criteria for deciding what counts as unfair competition" is key. /8

https://www.telegraph.co.uk/politics/2020/02/27/post-brexit-deal-may-come-late-less-perfect-can-done/

In the UK's mandate for the US, the government says that dispute settlement/enforcement, including tariffs, *should* apply to environmental and labour commitments.

This is ruled out in our EU mandate, and has been criticised for inconsistency. But there's a logic to it. /9

Why? Because the US ask on the *substance* of LPF is less onerous than that of the EU.

The key point is that the UK isn't opposed to stricter enforcement / retaliatory tariffs - *if* the underlying obligations are reasonable.

Substance AND enforcement matter. / 10 End