Brexit: those reckless Brexiteers

Sunday 31 July 2016  

Booker in his column today picks up on the vibes that many of us are getting. "A fearful shadow is hanging over our impending Brexit negotiations with the EU", he writes. "It centres on the very people who were most vocal in calling for a referendum in the first place: those senior Tory eurosceptics, including the 'Three Brexiteers' now billed to play the lead roles in the negotiations".

What became painfully clear during the campaign was not just that the official "leavers" were unable to offer a coherent "exit plan", but that they also seemed to be woefully ignorant of the technical complexities involved in any process of leaving the EU.

Although they did not share any common strategy, the likes of Boris Johnson, David Davis, Liam Fox, Bill Cash and Co, came up with one naive suggestion after another, based on nothing more than wishful thinking.

In practical terms, they showed that they did not really have a clue what they were talking about. Some even imagined that we could leave simply by repealing the European Communities Act, under which EU law automatically becomes British law: not realising how flagrant a break this would be of international treaty law, as enshrined in Article 60 of the Vienna Convention on the Law of Treaties.

If these people have one thing in common it is their insistence that we cannot remain part of the EU's single market, because this would require us to accept uncontrolled immigration from within the EU under its freedom of movement rules.

These people thus sneer at any thought that we should go for the immediate off-the-shelf solution of remaining in the European Economic Area (EEA), while joining countries such as Norway in the European Free Trade Area (EFTA).

This would allow us to continue trading with the single market just as we do now. We would even gain a limited right to control our borders, and would also be free to strike trade deals with non-EU countries such as America and India.

What these "Brexiteers" all seem to imagine is that we could somehow reach a special, one-off trade deal with the EU, quite oblivious to the fact that any such deal, as on the EU-Canada model, would take far too long to negotiate, and would exclude us from key benefits of the internal market, such as our vital trade in financial services.

The most crucial gap in their knowledge, however, is their failure to understand that, because all arrangements governing trade are now solely a competence of the EU, we can legally carry on international trade only in accordance with the immensely complex procedures laid down in the EU Customs Code, a package that is 1,300 pages long.

Unless Theresa May takes a firm grip on what her ministers are up to, by insisting that they go for the simple option of remaining in the EEA, we could even face the ultimate disaster where the timetable for negotiations runs out.

In this case, as I have already reported, we don't just drop out of the EU without a settlement, but also out of its Customs Code on which all our current trading procedures depend. Overnight we would no longer have any system of law allowing us to continue trading at all. Not just with the EU, but with anyone else.

Thus we're beginning to see a glimpse of reality in a national newspaper, albeit in the Booker "ghetto". But the point is made. Playtime is over and Tory MP eurosceptics really do need to get their act together.

These are not ordinary people – their prestige gives them considerable authority which they are currently abusing. They should not be using their positions to indulge their fantasies. Their job is to keep the Government on track, not to create unnecessary obstacles which might force us down the wrong path.

Richard North 31/07/2016 link

Brexit: questions and consequences

Saturday 30 July 2016  

A sign of childish immaturity is the willingness to promote or pursue a course of action with no regard to the consequences. A child will touch a red-hot surface, or put a metal pin in a live electrical socket, simply because they have no idea of the dangers.

So it is with the Spiked "Invoke Article 50 Now!" campaign – which I've ignored so far. These are children at play, sticking metal pins in live sockets.

There are two most likely outcomes of a premature Article 50 notification. The first is that, in starting before we are ready, we run out of time and have to negotiate under pressure, for a time extension. The price might be unacceptably high.

On the other hand, we fail to gain a time extension and, after two years, drop out of the EU Treaties. And, as we point out in this short report, the consequence is that we could end up unwittingly relying on the WTO Option. That would be catastrophic.

However, when consequences are borne by others, children can rely on their own ignorance to insulate themselves from them. They can hide from the reality, deny it or simply ignore it. And that's what the Spiked children are doing.

Fortunately, a (relatively) grown-up Prime Minister is not going to follow the clamour, or the stupidity of some of her Parliamentary colleagues. We still seem set for early next year before Article 50 is invoked. For tactical reasons, I would actually prefer it to be later, although I still have hopes of a pre-negotiation extension being agreed, taking the time constraints off the table.

Theresa May, however, doesn't seem to be helping the situation, with the Independent reporting that she is to appeal over the head of the European Commission to the leaders of the 27 EU nations in an attempt to secure a good exit deal for the UK.

The Prime Minister, we are told, will try to limit the influence of Commission President Jean-Claude Juncker and Michel Barnier, who is supposedly leading the Commission's negotiating team on Brexit.

This in itself is an odd situation as the Commission Press Release speaks of Article 50 as the legal base for the appointment of Barnier, with the decision having been made at the Informal Meeting in Brussels on 29 June 2016.

Yet the statement from the meeting (link here) declares that action will be taken only "Once the [Article 50] notification has been received". This actually makes Barnier's appointment premature and, strictly speaking, outside the framework of the Treaty.

The issue gets still murkier – at least according this Reuters report, which has suggesting that Britain "wants a bespoke model for its future ties with the European Union".

"We should be driven by what is in the best interests of the UK and what is going to work for the European Union, not by the models that already exist", she told a news conference in Bratislava, where the latest leg of her travels has taken her.

"We need to find a solution that addresses the concerns of the British people about free movement while getting the best possible deal on trade in goods and services", May then adds.

Reuters then rather unhelpfully offers what it thinks are details of the models it thinks have been proposed, telling us that these have included: "joining the European Economic Area or European Free Trade Association, forging a close partnership similar to those that Norway, Switzerland or Iceland have with the EU".

This is such a muddle that it's not even worth dissecting, but then there's not much out there apart from muddle. The Mirror, no great friend of the leave movement, takes the three Brexiteers to task, the ministers appointed by May to take the fall when Brexit goes wrong – or so we think.

Says the Mirror, "Our leaders don't know what Brexit means – and some of their ideas are laughable". As an indication of what the country's future might actually look like, and what sort of deals May's key negotiators might actually be seeking to do, there is no use looking around for a clearer picture of what the future might hold. Literally nobody knows.

Looking at what Oliver Letwin has to say, the Mirror is not wrong. Perhaps, therefore, it is better to stick to what we do know – and one thing we're totally certain of it that the WTO Option must be avoided at all costs. We are also fairly certain that an attempt to construct a bespoke agreement could end up in us unwittingly dropping into the WTO Option.

That, as always, leaves us with the Efta/EEA option as the least worst alternative, but that leaves open the problem of regulating freedom of movement. Nevertheless, we stand by our Liechtenstein/EEA solution as the best answer.

And there is possibly some room for optimism, with the Commission apparently prepared to do a deal with the Swiss on free movement. This initiative actually goes back to the end of last year and I had a look at it recently, with the Swiss looking to negotiate their own form of "safeguard measures".

If people started looking around them, and forgot their dogma, they would see that there are answers to be had. All we need to do is ask the right questions and accept that, whatever we do, there are consequences which cannot be ignored.

Richard North 30/07/2016 link

Brexit: an accidental crisis

Friday 29 July 2016  

It is generally held that there are three main options available to Brexit negotiators to settle our trading relations with the EU: the Efta/EEA Option (often known as the Norway Option); the bilateral free trade (or bespoke) option; and the so-called WTO Option.

Although we have looked at this WTO option and its potential consequences for the UK, many times, the complexity of the systems involved suggest we need to look at it in even more detail.

Firstly, though, it is necessary to define what is meant by the WTO Option. This is taken to be a scenario where, for whatever reason, the UK eschews any form of trading agreement with the EU and trades solely and exclusively within the framework set by the diverse WTO Agreements. This might occur by design (even though this is unlikely) with the UK deciding not to conduct negotiations with the EU, or by accident.

The accidental scenario is conceivable, arising in the event that the UK fails to secure a negotiated Article 50 settlement within the two years initially allowed by the Article, and then fails to get an extension of time. In this event, the EU Treaties cease to have an effect and the UK is forced to trade with the EU on the basis of WTO rules.

It must be said, and strongly emphasised in this context, that the WTO Option is an absolute. Some commentators advocate relying on the WTO rules to provide a basic framework, while additionally brokering side-agreements with the EU to cover areas of specific interest to the UK.

There may or may not be merit in such arrangements but point has to be made that these are not the WTO Option. Confusingly, some have used the description "WTO plus" – but this is already applied to new WTO entrants who are required to undertake Protocol commitments that are more stringent than those of original WTO Members. (known as WTO-plus commitments).

Others have suggested the term "beyond WTO" but, whether this or "WTO-plus" is considered, the essence – as Pascal Lammy has pointed out – is that in each bilateral free trade agreement we have the "WTO plus" provision". It is best therefore, when referring to the WTO Option, to use a definition that excludes any other form of agreement.

The acceptability of the WTO Option is often justified by reference to other nations which supposedly trade with the EU without the benefit of bilateral trade agreements. Often cited are the United States, Australia and China, which are assumed to be operating under WTO rules.

Such assumptions, however, are flawed – resting on an unduly narrow interpretation of a free trade agreement (or, technically, a regional trade agreement) as one which concerns tariff reduction and which are notified to the WTO and held on their databases. Trade agreements which do not deal specifically with tariffs are not notified to the WTO but are instead held on the United Nations treaty database.

Although regulatory cooperation forms a major part of any comprehensive free trade agreement, and the OECD identifies eleven categories of agreement involving what is known as "International Regulatory Cooperation" (IRC), only one encompasses the traditional trade agreement and is thus notified to the WTO.

The countries cited as having no trade agreements with the EU do in fact have multiple agreements with the EU – although none of them are notified to the WTO. They cannot in any respect be regarded as operating exclusively under WTO rules and cannot be held as examples of the WTO option.

This is especially the case with the United States which has its own State Department declare: "The United States and the 28 Member States of the EU share the largest and most complex economic relationship in the world". Transatlantic trade flows (goods and services trade plus earnings and payments on investment) averaged $4.3 billion each day of 2013.

On the European Commission's Europa website, there is the Treaties Office Database which boasts an advanced search facility. Search by "country" (United States of America) and "nature of agreement" (trade agreement) and the database will list 23 agreements. Under the category of "Agreement for trade and cooperation", there are a further eight agreements, in particular the 1976 Framework Agreement for commercial and economic cooperation between the European Communities and Canada.

This is described as a "non-preferential agreement" and the very first formal agreement of its kind between the EEC and an industrialised third country, under which the parties committed "to develop and diversify their reciprocal commercial exchanges and to foster economic co-operation".

With this and the categories, "agreement on Customs Matters" - an issue which is intimately trade-related - "Agreement on internal market matters", there are recorded 38 EU-US "trade deals", of which at least 20 are bilateral.

A similar exploration of China's status with the EU identifies multiple agreements - 65 over term, including 13 bilateral agreements, ranging from trade and economic co-operation to customs co-operation. None of these agreements are of the simple, tariff reduction variety, but collectively they have enabled China to become the EU's second largest trading partner, with trade valued at over €1 billion a day.

So many other countries have their own trade deals with the EU that it is difficult to identify countries which do trade solely under WTO rules – there are so few of them. One cannot even cite North Korea, ranking 182 as an EU trading partner, as this is not a WTO member. Altogether, the EU has 880 bilateral agreements with its trading partners, and there is no example of a developed nation trading with the EU solely by reference to WTO rules.

For the UK to trade with the EU relying on the WTO Option would be unique for a developed nation, creating an unprecedented situation. Because it is a unique event, it is not possible accurately or completely to define the entire range of consequences arising from the UK dropping out of the EU Treaties, with no replacement agreements, relying solely on WTO rules. That is an issue in itself, as the prospect raises considerable uncertainties.

Of the known knowns, however, one significant fact is that the EU's Customs Union is an exclusive EU competence. This means that Customs law - which provides the legal base for, and defines, the procedures adopted by officials to regulate the flow of goods (and some services) in and out of this country - is framed exclusively by the European Union.

This law drives an EU-wide system that handles 17 percent of world trade – over two billion tonnes of goods a year with a value of €3.3 trillion. Between 2004 and 2010, despite the impact of the financial crisis, the value of EU external trade had grown by almost 50 percent.

The EU is at the centre of global trade and supply chain logistics, and is the number one trading partner for the United States, China and Russia. More than 90 percent (8.4 billion tons of merchandise) of global trade is carried by sea, of which more than 20 percent is unloaded in Europe.

The EU has over 250 international airports. The eastern land border runs to almost 10,000km with 133 commercial road and rail entry points. Taking into account the entire EU external border (land, air, sea) there are in total more than 1,000 customs offices of entry.

In 2011, EU Member State customs processed 36 million pre-arrival cargo declarations, 140 million import declarations, 96 million export declarations and 9 million transit declarations. These figures represent an average of 8.9 declarations per second handled by the Member States' customs administrations. They collected customs duties that contributed an estimated €16.6 billion the EU budget, i.e., approximately 13 percent of the total.

In settling for the WTO option, the UK will be, whether by accident on design, embarking on a course of action that will cause significant damage to this system, and render it inoperative in the UK.

As far as the UK goes, the problem would then be that there would be no Customs law at all.The entire body of law has been replaced by the EU acquis, known as the Union Customs Code (UCC) legal package. It comprises the Union Customs Code itself, adopted on 9 October 2013 as Regulation (EU) No 952/2013 of the European Parliament and of the Council. This entered into force on 30 October.2013 although most of its substantive provisions apply from 1 May 2016.

It also includes the UCC Delegated Act, which was adopted on 28 July 2015 as Commission Delegated Regulation No 2015/2446. It contains certain non-essential elements of the UCC. Then there is the UCC Implementing Act, adopted on 24 November 2015 as Commission Implementing Regulation No 2015/2447. This is required to ensure the existence of uniform conditions for the implementation of the UCC and a harmonised application of procedures by all Member States.

Two other measures then complete the basic package. One is the UCC Transitional Delegated Act, adopted on 17 December 2015 as Commission Delegated Regulation No 2016/341. It establishes transitional rules for operators and customs authorities pending the upgrading or the development of the relevant IT systems to create a fully electronic customs environment.

The other is the UCC Work Programme, adopted on 11 April 2016 as Commission Implementing Decision No 2016/578. It relates to the development and deployment of the electronic systems provided for in the UCC and is closely linked to the UCC Transitional Delegated Act.

The point to be made here is that this body of law has emerged in its present form over many decades since its inception in 1968 and currently comprises over 1,300 pages. As regulations and decisions, the law has direct effect but, with UK independence, would cease to have any legal effect in the UK. To rebuild a Customs code in the UK, the elements which were applicable to the UK (and within its jurisdiction) would have to be replaced, starting from scratch.

As an emergency fix, some of the EU law could be re-enacted. But considerable adaptation would be needed. This would be a complex and time-consuming process and, assuming that the UK had lost Union law as a result of the expiry of the Article 50 process, this would be an unplanned event, requiring officials to work at speed under less than optimal conditions.

No doubt a series of emergency orders could be rushed into place but, during the period when new legislation was being produced, there would be no legal code applying to UK Customs operations. Temporary measures aside, it is difficult to see how a comprehensive code could be quickly or easily replicated, even if there were the personnel available with the necessary skills and experience. 

This might be further complicated by certain aspects requiring Union and international recognition - especially the mutual recognition of Approved Economic Operators (AEOs) and the mutual recognition of conformity assessment.

Nor is it necessarily the case that the resultant system could be fully functional at an operational level. Without ongoing agreements to ensure continued cooperation, UK Customs authorities would be cut off from risk management and other databases, and previously shared systems for communication and information exchange.

On this basis alone, the result would inevitably be serious perturbation to the Customs system and the management of traffic flow at the borders and UK ports. As I have remarked before, within a week, Operation Stack could have reached Leeds, as the disruption spread.

This will not because anyone wanted it or intended it to happen. It will be in the nature of an accidental crisis, not so very different from the scenario which brought the First World War into being, where the troops were mobilised and there was no means of turning back.

Richard North 29/07/2016 link

Brexit: politics in the pub

Thursday 28 July 2016  

I had the interesting experience of attending a session of Politics in the Pub yesterday evening. It's a good concept, and was at a good venue and well enough organised – a shame about the public address system which didn't work, but these things happen.

The subject which brought me there was "Brexit: what next for Bradford & Beyond?", a commendable mix of the local, national and international. It should have given the panel plenty of scope for a wide-ranging discussion about the forthcoming negotiations, and how they would affect the city.

In the panel of four, we had Cllr Susan Hinchcliffe, leader of Bradford Council & the ruling Labour group, Cllr Simon Cooke, leader of Bradford's Conservative group and Emma Pentelow, a local businesswoman described a financial advisor. The other was from a human rights charity. I didn't catch his name.

Logically, if we were to have a sensible and useful discussion, we needed someone to tell us in a little detail what the state of play was, what choices were on offer for Brexit, and how they might affect us nationally and locally. It would then have been helpful if we'd been given some advice about how the people of Bradford might influence the debate and make their concerns heard.

But instead of discussion on such issues, we got dribble. It became very clear, very quickly, that the four panellists were badly briefed, largely ignorant of the issues and had nothing useful or interesting to add to the debate. And, as the evening wore on, it became clear that there were many in the audience who were better informed than the panel, and had a better grip of the issues.

No one expected any great, penetrating wisdom from the panel, but a basic level of competence and appreciation of the issue was expected. It was not there.

In a sense, this was a microcosm of the national debate, where the "élites" are ill-informed and many in the population are far more knowledgeable than they are, but simply do not get a hearing. Yet still, to this date, the talking heads do not realise or acknowledge their inadequacies, yet feel free to inflict themselves on their fellow man.

It has been much rehearsed on this blog that people should take an interest in politics. Essentially, we argue, this is a matter of self preservation. Either you take an interest in politics or it will take an interest in you.

And here we have in the referendum result and event which, in its own way, is as profound as the fall of the Berlin Wall, with an impact that has the potential to wreck the economy, or open the way to an economic renaissance. People are concerned, and they came to be informed. Despite that, we had local politicians and commentators who could not be bothered to acquaint themselves with the basics and treated their audience (of about 50) with contempt.

I believe that, before leaving, I may have made some of my views known. I do resent having my time wasted but, even more, I rail against the discourtesy of public figures who do not give audiences the respect they deserve. I was a pity, incidentally, about Cllr Cooke. He's an intelligent and perceptive man and writes a good blog. But on this Wednesday evening, he didn't deliver.

Probably, the audience was too deferential, although I certainly started seeing signs of discontent from about halfway into the two-hour session. But it was only towards the end, after those two hours of dribble, that we got an intervention from a member of the audience, making point about the timing of the Article 50 notification, which added a degree of detail to the proceedings which so far had been missing.

When politicians wake up and look around them, therefore, and wonder why they are regarded with contempt, it is to meetings such as these – the many thousands like them – that they should look. There are the few instances where the public come face-to-face with their elected representatives, and the other "élites", and realise they have feet of clay.

The inherent good nature and the politeness of English audiences probably spares the politicians from the public humiliation that they deserve, and doubtless there were people at the meeting who might have felt my interventions ill-judged. But it also the case that far too many people are too easily pleased, and set the bar far too low in their expectations of politicians' performance.

To express public dissatisfaction at the poor performance of politicians, however, it the nearest thing we get to imposing a form of quality control. In Bradford, the proverbial donkey could become the Labour leader – and in this case seems to have done so. But if politicians, from both sides of the divide, feed rubbish to their audiences in public meetings, they should be told in no uncertain terms – no matter who they are.

And to that extent, Bradford Politics in the Pub did us a favour yesterday. It exposed a lazy, ill-informed and basically contemptible performance to public scrutiny. And those responsible for it did not pass the test.

Richard North 28/07/2016 link

Brexit: La Grande Dissimulation

Wednesday 27 July 2016  

Having been responsible, almost single handedly, for getting us out of the EU with our book The Great Deception, we now move on to a tougher nut, with La Grande Dissimulation. However, with our book now out on the streets of France – and not doing too badly by all accounts – it can only be a matter of time.

Frexit here we come.

Richard North 27/07/2016 link

Brexit: the Brexit dividend

Wednesday 27 July 2016  

Full immersion in the Brexit issue for the month since the referendum has not delivered anything like the euphoria that one might have expected. After all, the success of the "leave" proposition has not yet secured our exit from the EU and, Mrs May's assurances aside, until we are actually out, we are not in a position to count our chickens.

However, aided and abetted by the Express and others, there are those who are being rather precious about what constitutes leaving the EU, suggesting that continued membership of the EEA via the Efta – or "Brexit-lite" as it is sometimes called – is tantamount to staying within the EU.

Nothing, of course, could be further from the truth. Norway, Iceland and Liechtenstein are all fully paid-up members of the EEA Agreement yet, not by any measure, could they be considered to be part of the EU.

Nevertheless, we do understand the reservations about remaining in the EEA – although it is not always clear that people fully understand that we are already members. As a destination, or end point, the EEA is not optimal, although it has distinct advantages over full EU membership. We would have broken free from the drive to political integration and the jurisdiction of the ECJ, while staying in the Single Market.

As to freedom of movement, we have no doubts whatsoever that the Article 112 "safeguard measures" provide a mechanism which will enable us to resolve the issue of unrestricted immigration from EU Member States, at least for the short- to medium-term, creating space to engineer a lasting solution.

What then becomes essential though is that we define the end game. There is absolutely no point in bleating about the EEA being an "interim option", if the end game is defined in facile terms, such as a "free trade area". That cannot in any way compete with participation in the EEA/Single Market which is, after all, the largest and most comprehensive free trade agreement in the world – and certainly one of the most dynamic.

This is why, in Flexcit, we have gone to such trouble in phases three and five to set out the European alternative, and then the global dimensions which constitute the structures which are capable of delivering the Brexit dividend.

The problem we have is that the media and many of the pundits, having done little thinking over the last few years, are now focused on the immediate exit strategy, without in any way understanding that the Brexit opportunity lies not in the mechanics of securing an exit, but in the use we make of the freedom so gained.

Reviewing the elements of the Brexit dividend, the first and almost immediate gain is the ability to resume full participation in the global bodies of which we are members, casting our votes on our own behalf instead of being required to support the EU's "common position".

But what is not fully (or at all) appreciated is that, through the developments in globalisation – and in particular to TBT/SPS Agreements and the Vienna and Dresden agreements, we recover one of the most important legislative attributes which we have currently ceded to the European Commission – the right of initiative.

What in many ways makes EU membership so objectionable is precisely this right of initiative – the monopoly power to propose new laws and, because to repeal or remove a law requires a new law, the power to protect the acquis from dismantling.

Freed from the tyranny of right of initiative, the UK in concert with other states, can define the rule book at the global level and continental level. A remarkable example of this is the UNECE WP.6 Working Party on Regulatory Cooperation and Standardisation Policies.

Through this we have seen the development of the "International Model" of regulation, using the mechanisms of the Common Regulatory Objective (CRO) which achieves in a steady, unspectacular way the degree of regulatory convergence that agreements such as CETA and TTIP aim to achieve but somehow never actually deliver.

Then, through the TBT/SPS, etc., Agreements, the participating states are able to require the Commission to redefine the Single Market acquis, setting the rules for the market that the Commission must implement in preference to its own.

Over term, we have the ability completely to reshape the EU's Single Market, acquiring considerably more influence outside the EU than we have within it. The result will be the Holy Grail of European politics, an intergovernmental trading agreement created and managed by a community of equals.

But another huge element of the Brexit dividend is the ability to break away from the claustrophobic grip of the bilateral deals and the "big bang" regional trade agreements (the RTAs) which are actually holding back the expansion of global trade.

Instead, we can kick-start multilateralism and, in particular, concentrate on brokering narrowly-focused sectoral and product agreements which are easier and quicker to negotiate and yield more immediate cash benefits.

Then there is the issue of trade facilitation – the object of sneers from the trade deal "professionals" – which has the potential to deliver trillion-dollar annual dividends which relegate the modest gains from the likes of TTIP to the margins.

This, then, points to the way we should be framing Brexit – not as a sterile, mechanical process of extracting ourselves from the EU, but as a huge opportunity to redefine our position in Europe and the world. The key phrase is "Brexit dividend", the positive result of leaving and the reason we have worked so hard to achieve it.

Richard North 27/07/2016 link

Brexit: the consequences of failure

Tuesday 26 July 2016  

I was given sight of a draft paper recently in which it was argued that we should "exit" the Single Market and then negotiate a free trade agreement between the UK and the EU.

This is common enough fare, but when it came to how long this might take, the author averred that, after Norway had rejected EU membership in 1972, the Norwegians negotiated a trade deal with the EU in just under eight months.

We are advised that our agreement "might take rather longer than", but "with the prospect of German car manufacturers and French wine producers losing market share in the UK, the pressure to get a deal concluded within the two-year period allowed by the Lisbon Treaty would be substantial".

In the first instance, therefore, we are invited to accept that because Norway concluded a deal with the six Member States of the EEC, some 44 years ago, this provides some guidance as to how long an agreement between the EU and the UK might take during the expected negotiations.

However, if we look at the 1973 Norway Agreement, we find that the full dossier runs to 113 pages. The actual, substantive treaty runs to seven pages, and most of the rest deals with tariff reductions, the basis for which had already set by the GATT Agreement.

When we look to contemporary examples of free trade agreements, though, we see a rather different picture. The EU agreement with the Republic of Korea runs to 1,426 pages. This is accompanied by a 64-page framework agreement, with negotiations having started in 1993 and running on for 18 years before the agreements entered into force on 1 July 2011.

Another well-known treaty is the EU-Canada Comprehensive Economic and Trade Agreement (CETA) which runs to 1,598 pages. More than seven years after the main negotiations started, it is still not in force.

With this and much more, I think it is fair to say that the overwhelming balance of probability is that a comprehensive free trade agreement between the UK and the EU would take more than two years to negotiate. Almost certainly, it would be a "mixed agreement" so it would have to be ratified by all the 27 remaining EU Member States – which could present further problems.

Ratification aside, we are told that the" prospect of German car manufacturers and French wine producers losing market share in the UK" would create substantial pressure to get a deal concluded within the two-year period allowed by the Lisbon Treaty.

But, in fact, EU Member States does not need a trade deal to export to the UK, and neither can the UK impose any barriers to goods from the EU, without also imposing those self-same barriers on all other countries selling goods to the UK. This is part of WTO non-discrimination rules, where the UK acquires Most Favoured Nation (MFN) status.

On the other hand, the EU – as an established Regional Trade Agreement (RTA) – is allowed to impose discriminatory access rules to its members' markets, applying to nations defined as "third countries" a complex series of hurdles that make import difficult and expensive.

Since it is extremely unlikely that the UK would want to beggar its economy by erecting trade barriers (over and above those already in existence, and perhaps not even those), it is unlikely to impose any significant barriers to trade with the EU. By contrast though, EU barriers apply automatically to "third countries", built into the EU acquis.

Thus, the UK needs a trade agreement with the EU far more than it needs an agreement with us. And if the negotiations take us up to the two-year limit set by Article 50, that puts EU Member States in a very powerful position. They will be able to use an agreement to extend time as leverage to extract any number of unwelcome concessions.

Now, let's walk away from the land of fixed positions and their attendant certainties and ask how likely it is that we reach a full-blown free-trade agreement with the EU inside two years – not forgetting that it must be ratified and ready to come into force on the day we leave the EU?

If there is an element of uncertainty – and it is hard to argue that there isn't – then the next issue to address is the potential consequences if we fail to reach an agreement in the time, or the price demanded for a time extension is unacceptably high.

There are those who argue that the price of failure would be relatively modest – the imposition of the EU's common external tariff on a range of our products, which would render some of them less competitive, thereby reducing overall our exports to the EU-27 and increasing marginally our trade deficit.

This, however, neglects the impact of non-tariff barriers. Within the Single Market, most of these have been eliminated but, on exiting the market, many would re-emerge.

A small indication of the problems we would face are illustrated by this blogpost, illustrating the vital role of product certification as a requirement for access to Community markets. As we have discussed previously, this goes to recognition of conformity assessment. Outside the Single Market, existing arrangements lapse, as does mutual recognition of standards.

In the first weeks after we leave the EU, without any agreements in place, there is no doubt that importers attempting to bring goods from the UK into circulation within the Community would have a torrid time.

As the narrative to which I have linked above indicates, the crucial element of the EU system is that it is the importers' responsibility to ensure compliance of products presented to EU Member States ports, without evidence of which they cannot be released into circulation.

Without formal arrangements for testing and recognition of the associated documentation, consignments which were previously allowed through on the basis of documentation checks alone will have to be physically inspected. In many instances loads will have to be sampled and detained while testing is carried out.

The effects will be drastic. By comparison, the current delays in Dover are a minor disturbance, but they do show how quickly even small disruptions can turn into a crisis.

Nor have I even sketched the half of it. The inspection regime discussed applies to general goods, but for food and agricultural products, a different regime applies. Products from third countries - which the UK would become, without a trade agreement - must enter though specific ports, designated as Border Inspection Posts (BIPs). These are specific to each country.

Of course, there are no BIPs for the UK as we are in the Single Market. To equip a port (or ports) to function as a BIP capable of handling the traffic from the UK would require a major investment in infrastructure, personnel and systems. Exports of food to the EU-27 would cease, until facilities were made available.

No rational British Government would want this to happen. But under pressure from those who advocate exiting the Single Market, this Government with its slender majority could be forced into making a series of negotiating errors which could drive it down the path to disaster.

This becomes all the more relevant with a Daily Express poll which has 98 percent of respondents - 3,548 people – wanting immediate withdrawal from the EU. John Redwood, we are told, has come up with a plan to get Britain out of the EU "in just a matter of weeks". This "simple solution" involves repealing the 1972 European Communities Act and then informing the EU that the UK is no longer a member but intends to trade tariff free.

If the EU then decides to impose tariffs (which, of course, it would have to do under WTO rules) then Britain would respond. But because the UK has a trade deficit with the EU of almost £24 billion, Redwood has it that a trade war would be more damaging to European countries especially Germany which could lose its biggest car market.

There is no point in beating about the bush here. Such nostrums are insane - they drive a cart and horse through treaty and international law, and would precipitate a massive crisis in the UK, bringing EU trade almost immediately to a halt. Why, after the years of debate on exit strategies, is anyone even talking about immediate repeal of the ECA?

Handled properly, the benefits of Brexit for the UK could be huge, but there should be no illusions about the effects of a botched exit, based on this sort of insanity. We thus need people to stop playing fantasy Brexit and to focus on reality. We really cannot afford these games.

Richard North 26/07/2016 link

Brexit: it's NOT an "emergency brake"

Monday 25 July 2016  

In a classically ignorant piece from an increasingly inadequate media, we have the Guardian/Observer report that:
Plans to allow the United Kingdom an exemption from EU rules on freedom of movement for up to seven years while retaining access to the single market are being considered in European capitals as part of a potential deal on Brexit.
Senior British and EU sources, we are told, have confirmed that despite strong initial resistance from French president François Hollande in talks with prime minister Theresa May last week, the idea of an emergency brake on the free movement of people that would go far further than the one David Cameron negotiated before the Brexit referendum is being examined.

This is, of course, the Liechtenstein/EEA option, which we dealt with fully at the end of June and again here and then in great detail here, with a coda here.

But from this illiterate report, two immediate things emerge. Firstly, while we are quite obviously dealing with Article 112 of the EEA Agreement, if the UK is an Efta/EEA member, there is no question of us taking the passive role of a supplicant, waiting to be "allowed" this option. We take it as of right, unilaterally, and use it to broker a permanent solution.

Secondly, Article 112 is not an "emergency brake". It can be used in emergencies, but is of widespread application and can be used to deal with long-term issues – and without any time limit. Typically though, in yet more examples of media coprophagia, the Telegraph and Mail have copied out the story, repeating the errors and thus miscasting the issue.

This has "eurosceptic" Tory MPs squeaking with rage, although they have no excuse for this at all. Their leader, Steve Baker, has been given a copy of my full report, on which this was based, and had every opportunity to question me on it at my Treasury Committee appearance, when he briefly referred to it.

But instead, we have him bleating about ending up "with the Government doing things that don't end the supremacy of EU law, don't leave us able to control our own migration policy and leave us in the EEA", which in his view will cause "a great deal of dissatisfaction".

Ignoring his brief, the man instead trots out the same old, vacuous Vote Leave mantra, saying: "British migration policy needs to be operated on the basis of British citizenship, not EU citizenship. We want to have taken back control and be seen to have taken back control".

These people remain ignorant either because they want to be, or because they are too idle (or arrogant) to read the stuff put in front of them. The Liechtenstein/EEA solution is a perfectly valid idea and does much to reconcile the apparently conflicting requirements of Single Market participation and permitting freedom of movement.

Backing up Baker, we then get self-opinionated but profoundly ignorant John Redwood, pontificating about the UK not voting for a "slightly beefed-up version" of David Cameron’s attempted renegotiation with the EU.

If this man and his colleagues climbed off their high horses and widened their reading, before sounding off about that which they know next to nothing, we would all be far better off.

Richard North 25/07/2016 link

Brexit: the darkest of games

Monday 25 July 2016  

Those with memories that go back to the IEA Brexit competition in 2013-14 will recall that not one of the six finalists advocated the Efta/EEA option. All of these finalists "coincidentally" went for a then little-discussed Efta-bilateral option, the only six to have done so. And they all got a prize.

All those who advocated the Efta/EAA option were excluded from the final list – my submission included - even though a number of us had been originally shortlisted. Then the rules were changed, and a new shortlist of the shortlist was prepared. We found ourselves ousted from the competition.

That the head of the judging panel was Lord Lawson is no coincidence. This is a man who has consistently opposed the EEA option. And it is quite obvious that the IEA Brexit competition was rigged, unfairly to discriminate against those who offered the EEA option as a solution.

However, unlike most of the other discarded competitors, I did not take the rejection as final. I continued work on my draft, which is now in its eighth edition as Flexcit. But merely to have been so persistent has provoked the enmity of the eurosceptic "aristocracy" who, almost to a man (and woman), oppose the Efta/EEA option.

Amongst those are the group of "eurosceptic" Tory back-benchers, including Bill Cash, John Redwood and now the rising star, Steve Baker - all considered to be on the "right" of the party. They detest the idea of the Single Market, with an ideological fervour which defies any rationality. And because they have no rational base for their beliefs, they treat disagreement as tantamount to heresy.

These people don't fight fair. They attack the messenger, in my case briefing against me personally in a most disgusting fashion, all with the view of discrediting my arguments without ever having to deal with them.

Sadly, they've been aided and abetted by people whom I should have been able to rely upon as allies. But, since early days, just to exist and try and do one's work conscientiously, is to attract enemies.

In Ukip, in an attempt to neutralise the growing claims that our Party was racist, I recruited two Kashmiri Muslims to stand for Ukip in the 2001 General Election, only to attract the rabid hostility of a fundamentalist Christian group who effectively ran the Yorkshire region.

Writing The Great Deception, one might have thought, would have gained an amount of support, but it attracted a huge number of enemies in Ukip, as we failed to support the Rodney Atkinson theory that the EU was born of a Nazi plot.

My hostility to Nigel Farage, of course, has built up an extra cadre of enemies – his loyal fans who will hear no ill against their leader. I am supposed to give my unconditional backing to a man who had seriously damaged me financially and politically and who, to this day, briefs against me with a collection of well-worn lies.

Then, as we began to focus on leaving the EU, we looked seriously at Article 50, only to meet the sub-group who we have come to call the "trappists", who insist that the Article is a "trap" and that we should immediately repeal the ECA.

My subsequent support for a phased withdrawal from the EU has then built its own band of detractors, to add to the others, to which we must add the Cummings-Elliott nexus who, for their own thoroughly dishonest reasons, excluded me from the official leave campaign.

It may occur to the dispassionate observer, however, that my enemies have in common things which would lead them to be hostile to me, entirely unrelated to my own personality. After all, with the idea spread about that I am "difficult to work with", can anybody say that with a straight face after seeing Dominic Cummings in action? 

As to my critics, one only has to observe the discourtesy with which Steve Baker treated me (along with the rest of the Treasury Committee). He doesn't say so, but he completely disagrees with my position. But instead of having an open debate, he abused his position on the Committee to shut me out. The other witnesses were given twice the time I was allowed, drowning out my input.

But if that is the way these people work, there are others who have been taken in by the hostile propaganda. Some have argued that the Flexcit message would do better if it was detached from its primary author, and promoted separately as a concept by different people.

I've not entirely agreed with that view – not least because it is based on the false premise that I am the problem rather than the message. But I tolerated some independent initiatives before the referendum, simply to avoid any public display of disharmony.

This has been particularly the case with Roland Smith. But he has stretched tolerance to breaking point and beyond. With Sam Bowman of the Adam Smith Institute, he has produced a progression of posts, through which he has gradually sought to take ownership of the Flexcit agenda.

In work which quite evidently relies on Flexcit and the EUReferendum blog, Smith has only ever once admitted that his writing "borrows from the North plan". But in his latest evolution, published on Friday last, he offers a "collaborative effort" which once again "borrows from the North plan". Yet it is attributed to a group of authors led by himself, with no attribution to myself, the blog or Flexcit, or any recognition of the origins.

Sadly, in an (unsuccessful) attempt to make this "interim option" just sufficiently different from Flexcit to avoid a charge of outright plagiarism, Smith has introduced a number of errors, while also failing to keep up to speed with the EEA/Liechtenstein solution on freedom of movement.

He thus makes space for the predators to move in and damn his work with faint praise. That is the problem generally with cheap rip-offs. Superficially, they may look the same as the originals, but they are not as well-built and easily fall apart with only gentle use. This is why, of course, counterfeits should be avoided.

Significantly, one of Smith's co-authors is Dr Kristian Niemietz, who recently wrote an article for the IEA, headed, "Saving Brexit from the Brexiteers: why free-market liberals should support the EFTA/EEA option".

Dr Kristian Niemietz is the IEA's Head of Health and Welfare. He is seemingly obviously oblivious to the irony of his own Institute's rejection of the very same option when it was handed to them on a plate during its Brexit competition. But at least Niemitz in his own writing links to Flexcit – even though he doesn't mention it by name – an indirect and grudging acknowledgement of the source of the idea.

No such acknowledgement comes from Smith's other co-authors, Prof Steven Peers, George Peretz QC and Prof Simon Hix. Interestingly, the only time we seem to have heard about the EEA from Peers at such length is in a blogpost published on 24 June, the day after the referendum. So similar is this to the first stage of Flexcit – first published over two years ago – that it would be for him to show that he managed to dream up an almost exact replica all on his own, divorced from any external influence. 

At least the other two, Peretz and Hix, come to the subject anew, with nothing more to contribute to Smith's effort than their names. Hix in a YouTube presentation published on 30 June, effectively dismissed the option. His favourite response to it was: "please could I have a unicorn". Tellingly, he then went on to have a quick sneer at Flexcit, lumped in with fictional options.

All that aside, though, Smith's plagiarism presents me with a problem. Whatever justification he might have had before the referendum no longer applies. But when I have ignored it, he treats my silence as assent, and becomes more and more brazen in his theft.

At the other extreme, I do not want to waste money on formal action – that would serve little but to make a small band of lawyers even richer than they are already. And since I have offered the Flexcit free of charge to those who were prepared responsibly to promote it, I have suffered no financial loss.

In this case, though, Macmillan's "events, dear boy, events", are providing an answer. While Smith and his friends are so anxious to establish their ownership of a sub-standard version of Flexcit, the events of the past few days are rapidly making their efforts redundant.

When you look at the posturing of the Tory backbencher dinosaurs, and the actions of the Government in seeking to secure a Brexit settlement, even their rip-off version of Flexcit is so massively sophisticated in relation to what our protagonists are able to deal with, that it is totally beyond their comprehension.

On the one side, we have government agencies dealing with the mechanics of Brexit at an almost childishly superficial level, and on the other we have dinosaur Tories unable to see beyond their simplistic mantra of repeal the ECA", played to the repetitive counterpoint of "free-trade, free-trade, free-trade".

To such simple souls, the idea of an interim solution – presupposing a future end game which encompasses dimensions not already on the table – is so far beyond their comprehension that we all might just as well be speaking in tongues.

In context, Flexcit was intended as a referendum tool, designed to provide reassurance to wavering voters that there was a post-exit plan, and that leaving could be safe and largely cost-free. It was not intended for these people and doesn't speak to them. 

Now the referendum is over, Flexcit as originally drafted has largely done its job. I am already having to rewrite it to deal with the new political realities as they emerge. That a group of plagiarists now want to copy the old version is, in its way, very flattering. But it is largely a waste of time. The situation is changing faster then they can copy my work.

The important point, however, is that the work produced by Smith and his friends should not be confused with Flexcit. Although based on our work, they have introduced too many errors and are too far behind the curve for it to be taken seriously. If they want to market their sub-standard rip-off, they may as well get on with it, as long as they don't pretend it is Flexcit.

And while they play their games, we have to deal with the far greater threat, where the Tory dinosaurs, led by the likes of Steve Baker, are locking horns in a battle that has the potential to do far greater harm that Smith's petty theft.

Richard North 25/07/2016 link

Brexit: mixed fortunes for May

Sunday 24 July 2016  

Through the fog of political rhetoric, we get from French Finance Minister Michel Sapin a glimpse of the other side of the Brexit adventure, where the uncertainty is as damaging to the other Member States as it is to the United Kingdom.

Thus, while he is reflecting the realism stemming first from Angela Merkel and then his own boss, that the UK was unprepared for the outcome of the referendum to leave the European Union and so should be given time to respond, Sapin is also saying that, it should not take too long because of the damaging uncertainty, said.

"At the time, which is understandable given the shock and the lack of preparation of the British authorities, Britain needed a bit of time to organise itself and reflect on the way it should respond" Sapin tells Reuters.

He then adds: "But the time should not be indefinite, uncertainty is damaging, also economically, and in particular for Great Britain. So one needs to engage in negotiations as soon as possible. The talks cannot be done in bits".

The very last comment – on doing the talks in bit - is a little curious. If, for instance, we are staying in the EEA and rejoining Efta, than the only way the talks can be done is "in bits".

However, one should not run away with the idea that Sapin necessarily knows what he's talking about. Very often in politics, the higher up the tree you go, the less you know of what is going on around you. It would not be the first time that a Minister has been the last one in his own building to learn of important developments.

Nevertheless, the recognition that the UK will need to take a little time before it invokes Article 50 is at least seeping through the body politic, and that bodes well for the UK government, if it uses the time wisely.

On the other hand, nothing we're seeing indicates that the Government has in any way got as grip on the strategic aspects of Brexit, to the extent that it can define its strategic objectives.

Most likely, Mrs May – described by her detractors as a "belief-free zone" - doesn't have any strategic objectives. Rather, she is overly focused on the mechanics of leaving, without giving any thought to what we as a nation can achieve from the process.

All we have on offer of any substance comes from Mr Alexander (aka Boris) Johnson, temporarily on the other side of the Atlantic at the United Nations. He is saying that there is "absolutely no doubt that a balance can be struck" between access to the tariff-free market and the Single Market four freedoms.

But that is not pleasing back-benchers such as Bill Cash. He declares that the 1972 Act has to be repealed, whence he says, "Once we repeal the Act, we can't remain inside that market".

Although Cash has a reputation for being able to clear a room faster than the most strident of fire alarms, one should not under-estimate the mesmeric hold he has on the backbench group of Tory "eurosceptics". They treat him with a reverence normally reserved for minor deities. What Cash says, no "eurosceptic" Tory backbencher dare put asunder.

Thus, behind the scenes, his brooding presence poisons the well of discourse and the group cannot even agree publically on the basics, such as invoking Article 50. In the Land of Cash, to get out of the EU, we repeal the ECA and drop out of the Single Market.

Unsurprisingly, the Cash stance has been adopted by the European Research Group, and informal grouping of Tory eurosceptic MPs, formerly chaired by Chris Heaton-Harris, but now led by Steve Baker.

This is the same MP on the Treasury Committee who was so pressed for time that he couldn't hear my views on the need to stay in the Single Market. His group of MPs "do not trust" May to deliver on her pledge that "Brexit means Brexit" and have decided to insist on "total control of migration" as a "red line" in the Brexit negotiations, the scrapping of the ECA and severance of full links to the Single Market.

Baker says the MPs want to be "constructive" and "don't want to be oppositional ... at the moment", adding that if May sticks to her pledges, "all will be well". But he warns: "If we end up with the government doing things that don't end the supremacy of EU law, don’t leave us able to control our own migration policy and leave us in the EEA, then there will be a great deal of dissatisfaction".

May's position is said to be somewhere "between Canada and Norway", which means it might as well be on planet Zog where she can join Baker who, I guess, is not going to be terribly supportive of Flexcit in the Treasury Committee report.

With the Government limited to a working majority of 16, there are enough of these back-bench trouble-makers to bring down May if things don't go their way, and one MP warns of potential trouble, saying: "We showed under [David] Cameron that we can easily overturn that whenever we want to if we don't like the direction things are going in".

This puts May, potentially, in a difficult position. Seemingly lacking a coherent position of her own, she is also going to be pressured by a totally incoherent group of Tory backbenchers who are so far from reality that planet Zog, by comparison, is a garden suburb.

At a European level, though, May is being told that she cannot expect any special favours when the UK negotiates a new deal. A German government source warned that Merkel believes there will be, "tough times ahead" and that "we are entering a long and difficult process".

With her backbenchers playing hardball, the new Prime Minister may find herself having to rely on Opposition support to keep her agenda on track, with some serious squabbling to come when reality bites and deals have to be made with the "colleagues".

Perversely, that has the Independent forecasting that Mrs May will enjoy only the very briefest of honeymoons, following which she must expect trouble. I wonder at which point she might decide that becoming Prime Minister was a rather bad idea.

Richard North 24/07/2016 link

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