Brexit – Standards And Innovation: What's Ahead?

Author:Mr Howard Fogt, David T. Ralston, Jr., Rouget F. Henschel and Sophie Lignier
Profession:Foley & Lardner
 
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This article is the second in an ongoing series of blog posts by Foley & Lardner LLP on the implications of the June 23, 2016 referendum decision in the United Kingdom ("UK") to exit the European Union ("EU"). The first blog post reviewed briefly developments leading to the Brexit vote, the negotiating process that is now unfolding, possible alternative/outcomes and the likely implications as the UK resets its relationship with the EU. The first article reviewed potential implications for competition policy/procedure suggesting likely increased costs, complexity and uncertainty.

This post focuses on Brexit risks and uncertainty related to standardization and innovation. As with the issues relating to competition policy/procedure, questions on standardization and innovation remain to be answered as the terms and timing of the UK Brexit are played out and as businesses, governments and individuals take their own actions - whether large or small, intentional or inadvertent.

Suffice to say, there will likely, over time, be divergences and penalties that will not only change the "rules of the game" but as well undercut important drivers for product development, innovation, consumer welfare and economic progress. Even in the best of cases (whatever that may be), inevitable divergent paths presages difficult times ahead for the UK, the EU and its trading partners - less transparency, less consensus, greater costs and increased uncertainty. However dead the US/EU TTIP free trade agreement may be in this political season, Brexit is one of the nails in the TTIP coffin.

It is useful to reiterate, as said before, that the EU was created to merge "essential" interests of previously rivaling nations and to build a foundation for an economic community of "destinies henceforth shared." Critical to the achievement of such goals was considered the harmonization of trading terms and conditions and promotion of economic progress through innovation. Brexit undercuts such lofty goals and underscores continuing differences, prejudices and suspicions. While such terms may have an emotional element, they pose serious real practical costs.

For issues of standardization ("harmonization") and innovation, the outcome of the Brexit process will have important implications. As explained in more detail below, harmonized standards across as wide a trading area as possible produces substantial economies of scale and efficiencies. In a similar fashion, innovation is best...

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