Brexit: pure, unadulterated fantasy

Wednesday 21 February 2018  

It is a little bit difficult to decide which is more offensive: the stupidity of a Secretary of State who believes that mutual recognition of standards is the answer to EU market access, post-Brexit, or the gullibility of those people who give him a free pass, and treat this as a credible option.

If there was any justice, David Davis would have been openly mocked for his performance in Vienna yesterday. Why did he have to go all that way to deliver such a ridiculous speech?

But it was he who did the mocking, playing down fears that there could be "an Anglo-Saxon race to the bottom with Britain plunged into a Mad Max-style world borrowed from dystopian fiction". Instead of a "regression from the high standards we have now", he anticipated a "race to the top". But, from thereon, though, it was all downhill - all the way to the bottom.

In the official version of his speech, this started with a familiar litany of error. "We start from a position of total alignment, with unprecedented experience in working with one another's regulators and institutions", Davis said. Therefore, "The agreement we strike will not be about how to build convergence, but what we do when one of us chooses to make changes to our rules".

We've heard the like of this before and it is as wrong now as when it was first uttered. Yet Davis keeps trotting it out, despite the fact that it isn't true. The process of leaving the EU is in itself a divergent action. The UK not only steps outside the framework of EU law, it removes itself from the market surveillance system and the entire regulatory infrastructure.

But to demonstrate quite how slender his grasp of reality actually is, Davis then uses as an example a car produced in Austria to be exported to the United Kingdom. Currently, he says, that vehicle only has to undergo one series of approvals, in one country, to show that it meets the required regulatory standards.

Noting that those approvals are accepted across the European Union, he then goes on to say that, "that's exactly the sort of arrangement we want to see maintained even after we leave the European Union".

However, that is precisely the system which is not going to carry over when we leave the EU. This we know because the Commission has already said so in its Notice to Stakeholders - a document clearly unread in the Department of Brexit. Had they cast an eye over it, they woiuld have found that, after Brexit, vehicles approved by the UK authorities will not be approved for sale in EU territories.

For an illustration of where we need to go in order to recommence sales, the EU-South Korea Agreement is as good as any. Annex 2-C applies (page 1,144 et seq). This requires that vehicles produced in Korea must conform in their entirety with UN ECE Regulation, as adopted by the EU for its own code.

But this is not what Mr Davis has in mind. He claims that the European Union "has a number of mutual recognition agreements with a variety of countries from Switzerland to Canada to South Korea" which, supposedly, cover "a huge array of products - toys, automotives (sic), electronics, medical devices, and many, many more".

In Mr Davis's view, the "crucial part" of these agreements "is the ability for both sides to trust each other's regulations and the institutions that enforce them. With a robust and independent arbitration mechanism". Such "mutual recognition", he asserts, "will naturally require close, even-handed cooperation between these authorities and a common set of principles to guide them".

Yet virtually everything Davis says here is false. Mostly, it is pure, unadulterated fantasy. In the context set by Davis, the European Union does not have "a number of mutual recognition agreements with a variety of countries from Switzerland to Canada to South Korea". This is because he mistakenly implies that the "mutual recognition" applies to standards. Such as do exist are very, very limited. They do not cover "a huge array of products".

It almost beggars belief that the Secretary of State for Brexit could be so wrong, or make such a basic, "rookie" mistake, but he is confusing mutual recognition of standards with mutual agreement of conformity assessment.

Aside from provisions on conformity assessment, the only mutual recognition agreement in CETA covers mutual recognition of certain professional qualifications. In a separate agreement on conformity assessment between the EU and Canada, it specifically states that it, "shall not be construed to entail mutual acceptance of standards or technical regulations of the Parties and … shall not entail the mutual recognition of the equivalence of standards or technical regulations".

Similarly, the two agreements with Switzerland (here and here) cover only conformity assessment. There are no separate MRAs on standards.

When it comes to mutual recognition of standards, we have already pointed out that the EU accepts this only between Member States, within the context of the Single Market. Mutual recognition of standards does not even extend to the Efta/EEA states. 

More generally, the EU prefers to work on the basis of harmonisation of standards. There is in fact, a hierarchy of arrangements. At the top of the tree is harmonisation. Lower down is the "approximation of laws", then comes regulatory equivalence, and only then mutual recognition.

Yet, despite this, the Independent has Davis calling for what amounts to an entirely unrealistic agreement based on mutual recognition. Britain, the paper reports him as saying, wants a Brexit trade deal that gives it free, unrestricted access to EU markets but where it was "not required to obey European rules".

To achieve this, Davis - we were told - rejected the idea that the UK has to stay aligned with EU regulations to avoid trade barriers. As an alternative, he called for "mutual recognition" between the two regulatory regimes to avoid cutting British firms off from the continent, wrongly believing that the EU will permit this..

Questioned by Vicky Young of BBC News, he then repeated the error. Young asked him whether "we have to stick to the rules if we are to have frictionless trade", whence Davis again referred to the examples from Canada, South Korea, Switzerland, "which are outside the European Union".

These, he said, are "not required to obey European Union rules but have mutual recognition standards. And that's something that every free trade agreement has, some method of recognising the quality standards, the outcome standards, safety, emissions – not the way you do it, not what your laws are that have to harmonise with the European Union and so on".

All Mr Davis might actually achieve is a very limited form of acceptance of some UK standards, under what is known as "regulatory equivalence" – a concept very different from the portmanteau mutual recognition of standards, where partners' laws are accepted unconditionally.

Equivalence applies when the EU is prepared to accept that a trading partner's laws in a specific area achieve the same effect as the EU's laws. But any such arrangements are made only sparingly, on a case-by-case basis, and can hardly form the basis of a trade agreement. There are no generic equivalence agreements.

All we are left to do, therefore, is to wonder how David Davis can be making such a mess of his brief, to the extent that he is placing at the centre of his EU trading strategy something which is simply unattainable. One can only surmise that he is being unduly influenced by the Legatum Institute, which has foolishly been promoting the idea of MRAs on standards.

If we are to progress, the Secretary of State needs to break away from this false counsel and join the real world. We are not going to get the EU to accept mutual recognition of standards and the sooner we recognise that, the better. To gain market access, we will have to remain tied, for the time being, to the Union's harmonisation programme.

We could have done that the easy way, by retaining membership of the EEA. But, if we are going to be on the outside, then ministers (and MPs) need to reconcile themselves to the consequences and stop pretending that there is a magic solution called mutual recognition.

Richard North 21/02/2018 link

Brexit: no room to deregulate

Tuesday 20 February 2018  

From an historical perspective, the news of meat suppliers Russell Hume going into liquidation is of some interest, not least because one of the more prominent reports of the event is carried by the Guardian.

It was this newspaper which, back in the late 1980s, led the campaign for the uniform application of the supposedly more rigorous "European" meat hygiene standards. This was at a time when, before the advent of the Single Market, only operations which exported to EC countries were required to meet European standards.

Eventually, the Guardian was to get its way, following the promulgation of Council Directive 91/497/EEC. The effect on the meat industry was devastating, with the loss of over 1,400 small/medium slaughterhouses and cutting premises.

The introduction of European law, however, meant more than just a change of ownership of the legal code. It forced the replacement of the traditional UK system of food safety monitoring and enforcement. This stretched back to 1848, based on local government Medical Officers of Health and their field assistants, then called sanitary inspectors – the forerunners of today's environmental health officers.

Instead, we got slaughterhouses supervised by full-time "official veterinarians", leading to a centralised enforcement operation called the Meat Hygiene Services (MHS). This was established in 1995 and finally absorbed into the Food Standards Agency in 2010 as a fully national operation.

In accordance with EU law, the vastly more expensive system of veterinary supervision had to be paid-for by the meat industry and, with veterinary fees costing individual slaughterhouses tens of thousands of pounds a year, the pressure was on to reduce costs.

Enterprising contractors, supplying the MHS with vets, started to recruit cut-price vets, initially from Spain. Mostly, they were newly qualified, with limited English language skills and no enforcement experience in British slaughterhouses. The system was, and is, a travesty. Not least, detached from the local authority enforcement infrastructure, it lost vital local intelligence on how the trade was functioning, where the cheats were and who was cutting corners.

To some, in the wake of the BSE crisis, this was the price worth paying. And, as the law transmuted into Regulation (EC) No 853/2004, we were supposed to be entering a European nirvana where consumer protection was elevated to an all-time high, leaving all our food safety troubles behind us.

Yet, it was this same legislation and European system of hygiene control which gave us the horsemeat scandal, when the lid was lifted on food fraud as a major and largely unchecked element in the food industry.

Now we have this latest blemish on our story of European perfection. The system that the Guardian so much wanted as the antidote to food scares has now brought us Russell Hume, the closure and liquidation of a major meat supplier, allegedly for instances of serious non-compliance with food hygiene regulations.

How this was supposed to happen when the premises are approved by official veterinarians and under constant supervision is not explained. Clearly, the system – which is supposed to pre-empt problems – is not working.

Altogether, "Europe" has been a disaster for the UK meat sector and if anyone should be celebrating Brexit, it is the thousands of people robbed of a living by EU rules which, after all the trauma, have not delivered on their promise.

Despite that, we now see the Efra committee complaining that "non-British EU veterinary surgeons are critical to the UK veterinary workforce". This is our friend Mr Neil Parish who, when I first met him in as an MEP in Brussels, was one of those Conservative politicians who was eager to condemn European interference in our food control system.

Clearly having forgotten those days, his committee now calls for the government to "set out how it intends to ensure working rights for non-British EU vets currently working in the UK and to support the veterinary workforce going forward to ensure that it can meet the needs of the UK’s food industry in the future".

The original system of local authority control under the aegis of environmental health officers is now so far in the past, it seems, that very few people even realise that the current system is wholly an EEC import. Certainly, no one is calling for the restoration of the previous system.

The trouble is that what is left of the industry has been so heavily restructured that it is entirely dependent on the Single Market, freely importing and exporting product to meet demand, so much so that the entire industry has become Europeanised. That much became evident in the horsemeat crisis, where the international nature of the trade became highly visible.

In short, there is no going back – not in the short-term. We are committed to a European system of food control (which itself has transformed itself since the Sixties), just as the industry is now reliant on free access to the European market. Sudden change would be devastating.

And, for better or worse, no one sensible will dispute that such controls are necessary, imperfect though they are. A small indicator of the need for them comes in a report picked up from New Zealand by the BBC.

It tells us of how he discovery of hundreds of brown marmorated "stink bugs" aboard cargo ships bringing some 12,000 cars from Japan to New Zealand mean that the car carriers are being turned away to be fumigated. Apparently, there is no facility in New Zealand which can deal with the pest, so at least three of the ships are "floating aimlessly in the Pacific".

According to the BBC report, the stink bug, which is native to areas of East Asia but can also be found in Europe and the Americas, is a problem for fruit farmers around the world. The beetle voraciously sucks the liquid out of fruits and its toxins cause the plants to die. They have the potential to cause major damage to New Zealand's entire fruit and vegetable industry.

The agricultural sector is a crucial part of New Zealand's economy, worth £20 billion in the year ending June 2017. Strict biosecurity laws implemented by the Ministry of Primary Industries exist to prevent any kind of pest from entering the country, as pests introduced by man are one of its major threats.

Here, there is an added complication that the fumigant often used against the stink bug - methyl bromide - damages car upholstery to the point that they are unsalable. An alternative, sulfuryl fluoride, is not approved in New Zealand, but the Ministry is now considering its use.

This is a classic example of the need for border controls to prevent disease and the spread of pests (with the two often closely related). Like it or not, as we're seeing with the meat industry, we will have to keep these controls in place, known as sanitary and phytosanitary controls – even after Brexit.

Not only do we need them to protect our indigenous industries, our ability to export to Europe and worldwide depends on us keeping them in place. There is no scope for deregulation and, if we adopt US standards, that will automatically exclude us from the European market and those countries which adopt or shadow EU standards.

The ironic thing for me personally is that it was the imposition of the European system of food control which brought me into the fray as a fully-fledged Eurosceptic. I maintained then, back in the late 60s, that it was a substandard system, and my view hasn't changed – even with the so-called improvements.

Sadly, international trade depends not only on the application of standards, but on the acceptance of systems that were acceptable to all parties. The UK system, although better in my view, was almost unique (only a few countries in the world adopting it), to the extent that we were out of step with the global as well as the European system.

As long as we were a net importer of meat, with very little exported, that didn't matter very much, but globalisation has forced the change. We now export meat products to Europe and all over the world. With global trade comes global standards – largely based on the European model (even in the US, which also uses vets to inspect meat).

On the other hand, the extraordinary situation where some 700 branches of Kentucky Fried Chicken have had to close because of a failure in the distribution system illustrates the fragility of modern supply chains. Very little disruption can have a dramatic effect.

This puts the "deregulators" and the "free trade" purists in a fantasy world of their own making. There is no way we can dismantle the food safety controls that are in place, or start messing with them and not expect serious consequences.

Furthermore, with the trend towards global harmonisation of standards, mutual recognition isn't on the agenda. Experience tells us that dual standards are not a realistic proposition. So if you want to export, and the price is regulatory conformity, that must also extend to domestic production.

A little of this seems to have percolated into the collective brain of the UK government - but only a little. In his "Road to Brexit" speech to be delivered in Vienna, David Davis is to ask the EU to trust Britain not to turn into a "Mad Max-style world" of no rules after Brexit. Foolishly, though, Davis is expecting a regime of mutual recognition to apply, which isn't going to happen – on which subject I will have to return.

In the meantime, though, it looks as if we are to continue to see useless vets in our slaughterhouses for some time to come. Even though we won the war, this is a battle we have lost.

Richard North 20/02/2018 link

Brexit: ignorance will prevail

Monday 19 February 2018  

It was only a little while ago that I was ruminating about the inadequacies of select committees, with a particular focus on the proceedings of the Brexit committee.

This time, it's the Environment, Food and Rural Affairs (Efra) Committee, chaired by Conservative MP (and former MEP) Neil Parish, which has delivered a report on "Brexit: Trade in Food". And what an appallingly slender document it is.

The report was an opportunity to tell it like it is – what happens to food and farming once we leave the European Union. Instead, amongst other things, what we got was that:
Non-tariff barriers are also a huge concern to the agricultural industry. These will add additional paperwork and checks to trade, with the potential to cause an additional expense and delays to businesses. The Government must be prepared for a situation where we trade under WTO rules, and start preparing accordingly.
This is a report that concerns itself mainly with tariffs, and that it its first big weakness. For sure, if we walk away from the EU and decide to adopt the full monty on tariffs, food prices will take a hit. But that very fact makes it most unlikely that we will go down that path. Even this inept government is capable of closing a deal that lets in food from EU territories tariff and quota-free.

It has always been the case, therefore, that the real grief will come with non-tariff barriers. These are not "also a huge concern". They don't just have the potential to cause "additional expense and delays". That's rather like saying that the H-bomb that's just been released over London has the potential to raise street temperatures for a while.

Non-tariff barriers, in respect of food and farming are the main event and, unless we take heroic efforts to mitigate their effect, they are a show-stopper. Exports to the EU come to a screeching halt and remain blocked for the foreseeable future. Imports are difficult and slow, and it is almost certain that we will see significant shortages in the aftermath of Brexit, once any transitional period it over.

But from Neil Parish and his band of MPs, we get no evidence that they even begin to understand this. For a start, they deal with the matter of Border Inspection Posts and veterinary checks under the subject heading of "customs checks". Yet, as readers of this blog will readily understand, these are not customs checks. They are official controls, set out in Regulation (EC) No 882/2004 and are not part of the Union Customs Code (UCC).

From the phrasing of the report, however, it seems the MPs think that the absence of veterinary checks that we enjoy now stem from our membership of the Customs Union, and then refer to "evidence" taken on the impact of the UK trading as a third country.

Should that status apply (and they seem to convey that this is option), they tell us that "the UK will be subject to strict customs checks and controls at the first point of entry into the territory of the EU, to ensure that products are of a satisfactory standard".

One could take from this a certain ambiguity in that the "controls" could be considered separate from the "customs checks", but that is grasping as straws. The MPs are marking down veterinary checks as customs checks. They are not. They MPs have got it wrong – they don't know what they are talking about.

For the nature of the "official controls", the MPs could get their researchers to read the relevant parts of Regulation (EC) No 882/2004 into the record. They also have the advantage of the Notice to Stakeholders on "Withdrawal of the United Kingdom and EU Food Law", published on 1 February. Heavens forefend, they could even have read my Monograph 17 on food exports to the EU.

But they do none of these things. Instead, they rely on five pages of written evidence from N G Brooks, a retired former Principal Veterinary Administrator in DG Sante of the European Commission.

In one material respect he gets things wrong, declaring that, "in the absence of any negotiated agreement between the UK and EU, we risk overnight on the day of exit becoming a third country with the practical problems for transport and export of animal food products that will ensue".

But, short of us staying in the EEA (which Theresa May has said we will not do), we automatically become a third country. There is no "risk" – as in probability: we will become a third country, with all that that entails.

Mr Brooks then goes on to specify what that entails, but he makes two important omissions. The first is in the Notice to Stakeholders, and – as we pointed out recently, on becoming a third country after Brexit, the UK will no longer be listed as a country from which foods of animal origin may be imported.

This alone, I wrote, will mean the complete cessation of imports until such time as the UK is listed – a process which must apply product by product, and sector by sector. There is no single listing applying to all products. And how long that will take simply isn't known. The EU can fast-track certain provisions by, in the main, full listing could take anything up to six months or even more.

In proper evaluation of the effects of Brexit on the food industry, this should be stated. After all, this is exactly what the Commission is telling us. But Mr Parish and his MPs don't think it important. More to the point, their incompetent evidence gathering and their reliance on witnesses has led them to produce gravely flawed work.

Then there is the second thing missed by Brooks. All establishments in the United Kingdom from which the food is dispatched to the EU, and obtained or prepared in, must be "listed" by the Commission for public health purposes under Regulation (EC) No 854/2004. But, as the Commission points out, on Brexit, this Regulation will no longer apply. These establishments will no longer be approved to export to the EU.

When the hurdles are overcome (assuming that we maintain regulatory convergence), there is then the matter of the BIPs – and their acute shortage. The Committee seems to note this, remarking that "this would limit the ports through which UK exporters of products of animal origin may initially send or route their consignments". It also notes that, "Current border inspection posts are not capable of dealing with additional checks required from imports and exports to and from the EU".

Thus, you might have thought that the Committee would put two and two together. After all, "not capable of dealing" means that consignments will not be dealt with. But, all we get from the Committee is:
Any change in our trade arrangements has implications for the smooth movement of goods between the EU and the UK, and could lead to serious disruption to supply chains. A future bespoke agreement must address the costs and delays associated with customs and border controls.
and …
Delays at border inspection posts lead to increased costs, and are a threat to perishable goods. It is imperative that the Government sets out how it intends to ensure that the right IT systems and infrastructure are in place for the import and export of agricultural produce so that businesses can continue to trade smoothly with Europe, including the Republic of Ireland, and the rest of the world.
There is more to the report, but we need go no further. If this is the best the select committee system can offer, it needs to be wound up forthwith. All it is doing is wasting time and money.

And then there is the opportunity cost. An uncritical media, with no specialist knowledge, reports the drivel, with both the Independent and the Guardian being among those which miss the crucial points.

With the select committee having visited the subject, there is now no need for the media to revisit it. Ignorance will prevail.

Richard North 19/02/2018 link

Brexit: the enemies within

Sunday 18 February 2018  

It occurred to me as I followed the drama of Ukip's leadership turmoil that the people who have done the damage to the party are not those who resigned – often in disgust or despair at the party's behaviour – but those who stayed in it or joined after I had left.

Despite being the only political party dedicated to leaving the EU, it failed to take a lead role in the referendum and, since then, has barely contributed to the post-Brexit debate, degenerating into warring factions that has now spawned Gerard Batten as the interim leader.

If the ejection of Henry Bolton as Ukip leader hasn't spelt the death-knell of the party, then the appointment of Batten will complete the process. In the lead in declaiming Article 50 as a trap, and one of those who is convinced that the EU is a Nazi construct, the longer he is in post, the more damage he will do.

Meanwhile, filling the vacuum left by Ukip's multiple inadequacies, is a sinister group of right-wingers, coalescing across the Atlantic to form a coalition of think-tanks to pursue their anti-regulation, "free trade" agenda in the form of a UK-US trade agreement.

Their identity has apparently been released by accident after the premature publication of a report on Daniel Hannan's Initiative for Free Trade (IFT) website (now removed).

On the American side, we have the AEI, the Cato Institute, the Manhattan Institute, the Heritage Foundation and the Competitive Enterprise Institute. The Cato Institute – which was founded by billionaire oil refiner, Charles Koch – is planning to write the first draft of an "ideal" trade agreement between the UK and the US.

On this side of the Atlantic, we have the IEA, the Legatum Institute (rather predictably), the Adam Smith Institute, Civitas and the Policy Exchange – which hosted foreign secretary Johnson's Brexit speech last week.

Interestingly, Johnson features in the Booker column this week, when his rallying cry on Brexit left some of us wondering, not for the first time, whether he has quite the secure grasp on reality we expect from a Foreign Secretary.

Booker remarks that, as he enthused about Britain "going global" he looked forward to the day when we can start scrapping all those "intolerable" EU regulations.

But as Booker first noted back in 2013, under the heading "Forget Brussels – now we are ruled by the giants of Geneva", what no UK politicians seem to have noticed is the revolution whereby so much EU regulation now originates from global bodies even higher than Brussels, which merely passes it on.

At the time, Efta had just reported that "more than 90 percent" of the EU's single market rules now came from UN and other global bodies, such as the OECD, the Food and Agriculture Organisation and the United Nations Economic Commission for Europe (UNECE), all of which had to be faithfully transcribed into EU law.

Thus, avers Booker, what Boris will discover is that "going global" will mean that we still have to obey almost all those same global regulations, In the trade it's called "the double coffin lid". You escape from one coffin, only to discover there's another one even bigger outside it.

However, Hannan's IFT benefitted from the presence of Johnson at its launch – who made available Foreign Office premises for the event (possibly in breach of the ministerial code), and he has the enthusiastic support of Liam Fox's Department of International Trade.

Thus, while Johnson's ignorance undoubtedly contributes to the lack of any reference to the structure of world trade and the role of global regulation, there is also this more sinister agenda at work, dominating the right wing Brexit ambitions.

Not content merely to leave the European Union, these people are seeking to exploit it as an opportunity to promote their own political doctrines, based on the notions of free trade and minimal regulation, supposedly guided by the model of the economy in Singapore.

Having met most of the players on both sides of the Atlantic, and known and followed their work for decades, one is struck not by their grasp of the subject but by their most profound ignorance of how the global trading system actually works.

But this ignorance is doctrine-based. They know nothing of the system because they don't want to know. Ultimately, they are wreckers, determined to tear down the existing order and replace it with their own.

Their initial targets, as the Guardian points out, are food and agricultural standards and public procurement. In the second grouping, the glittering prize is access to NHS contracts for US health care enterprises, leading to charge that the Brexit agenda conceals a plot to privatise the NHS.

Inasmuch as this right wing grouping would indeed wish to see the break-up of the NHS, there is some truth in the charge, although it cannot be said that this ambition represents the Brexit movement as a whole, or even a significant part of it.

It would be more accurate to say that Brexit is being exploited for doctrinaire purposes – a complication we could do without, not least because it fuels left wing hostility to EU withdrawal. Linking Brexit with a plot to dismantle the NHS could be a powerful weapon for remainers determined to reverse the referendum result.

Almost as powerful is the symbolism of "chlorinated chickens" and hormones in beef, which has been used to illustrate the potential effects of a trade deal with the US. And while the impact of cheap US produce on UK agriculture is perhaps not as severe as might be imagined, this is another issue which can be recruited by remainers to their cause.

To that extent, the worst enemies of Brexit, far beyond the incompetence of Ukip, are these highly motivated and influential right wingers. With considerable funding from wealthy donors, they are hijacking the Brexit process, taking it far beyond any imaginable mandate that the referendum might have conferred.

They are quick to say that the vote requires us to leave the Single Market, thus claiming an electoral mandate – despite the claim being highly questionable – but by no stretch of the imagination can the referendum result be considered a carte blanche for turning the UK into a bastardised version of Singapore.

That they lack a mandate for such a fundamental change, however, undoubtedly explains the underhand way in which the agenda is being rolled out. As a centrepiece to a general election campaign, this would almost certainly ensure victory for Labour – which is why it has never been put openly to the electorate.

The core agenda, as it stands, involves abandoning our longstanding trading arrangements with Europe, and their replacement with what amounts to an "Anglosphere" trading association, based loosely on the white Commonwealth and the United States.

Having never been put to the electorate, it is thoroughly dishonest, with the promoters entirely meriting the epithet "sinister". Were the full agenda to become publicly known, it could damage the support for Brexit to such an extent that the whole process could founder.

We are thus confronting the enemy within. Although they wear eurosceptic clothes, they are no friends of Brexit. In pursuing their own interests, they are squeezing us between left and right and, ultimately, could destroy any hopes of achieving a rational Brexit.

Richard North 18/02/2018 link

Brexit: distorted priorities from the IoD

Saturday 17 February 2018  

Sadly, we have become used to the incompetence of government in the handling of Brexit and the inadequacies of the legacy media are plain for all to see. We see similar failings in the halls of academe and most of the think tanks in the field are proving to be a waste of oxygen.

To that extent, Brexit is proving to be the fault line, showing up the inability of society to deal with change. But, at the very least, one might have thought that the economic aspects would attract a considered response from business.

So far, though, the results have been erratic. The banking and the pharmaceutical sectors are on the ball (or relatively so), but others are less so. Necessarily, many sectors have relied on their trade bodies and these have been all over the place. More recently, as we have seen, the food and farming bodies have been making a poor fist of it.

As for the more general bodies, one such is the CBI. But it is so far from covering itself in glory that it has written itself out of the script. And that leaves the Institute of Directors (IoD), its nearest competitor, putting in its bid for pole position.

Its latest offering in this respect is a report entitled: "Customising Brexit - a hybrid option for a UK-EU trade framework", written by Allie Renison, Head of Europe and Trade Policy. Published yesterday with an accompanying press release, the kindest thing I can say is that the IoD has made as much a mess of its pitch as anything the CBI has ever produced.

Fortunately, Renison has only written only ten pages, lessening the analytical burden. And then, making life even easier, she has managed to destroy her own case within the first paragraph of her 1000-word introduction, by employing a startlingly egregious non-sequitur.

In that paragraph, we are told that the UK is leaving the European Union, and with it the EU's customs union. Says Renison, the latter is arguably less a matter of choice but one of necessity, just as many of the fundamental tenets of the EU's Treaties must fall away from the UK with EU exit.

But with this as a baseline, in the very next sentence she makes the most extraordinary leap of faith, telling us: "While a transition or implementation period may temporarily prolong its operational effects, any long-term continuity would ostensibly have to take the form of a new customs union".

For sure, "a new customs union" is an option, but there is considerable discussion as to whether it is attractive – or even a practical proposition. The one thing for sure is that "any long-term continuity" would not necessarily (or at all) have to take this form. There are several other options.

However, this sentence shapes the entire report. Renison is on a mission to sell us a partial customs union as the IoD's unique contribution to the debate. Furthermore, she is not just presenting this as part of a transitional process. We are enjoined to consider this for the "end-state".

According to Renison, the arrangement would be similar in scope to Turkey's agreement with the EU, used as a base upon which to build a broader free trade agreement. It would cover all industrial goods and processed agricultural products, aimed at facilitating the flow of goods across UK-EU borders – or so says the press release, even though the evidence indicates that the customs union in Turkey does nothing to speed the flow of goods.

That aside, Ms Renison's main concern, she says, is to remove the need for UK manufacturing to face costly "rules of origin" (ROO). These, she believes, could render a straightforward tariff-free deal – as in a free trade agreement - meaningless for many companies. And on that basis, we see a complete switch from the idea of an FTAs to an obsession with agreeing a customs union.

In this context, "obsession" is exactly the right word. Renison, to judge from her Twitter traffic, has got herself tied up with a number of pundits who have convinced themselves that rules of origin present a serious obstacle to our post-Brexit trading arrangements with the EU.

This is an issue about which I have written very little, precisely because – in my view – it is of such little importance. Renison herself cites an EU report which suggests that unmitigated ROO, in the Turkey situation, would add two percent to the cost of trading. This must be compared with the cost of regulatory non-tariff barriers, which can add as much as 20 percent to the price of imported goods.

In absolute and comparative terms, therefore, ROO are the least of our problems. If the UK wanted to avoid these marginal costs, it is not necessary to resort to a customs union. Should we do so, it would not facilitate the flow of goods across borders – not even the Irish border, despite Ms Renison's assertion to that effect.

As for dealing with ROO, there are better ways of avoiding the problem. For instance, when we leave the EU, the government is planning to apply the EU's schedules of tariffs to our trade with the rest of the world. This is an application of what is called coordinated unilateralism which, if a degree of formality is needed, can be cemented into place with a political declaration.

Such an arrangement makes the idea of a customs union an irrelevance. We will need, of course, to agree tariff-free trade with the EEA but, short of an acrimonious "no deal" walk-out, I don't see any situation where that will not be part of the final exit deal with the EU.

As long as we continue to harmonise our external tariffs with the EU, this will have the same effect as adopting the EU's common external tariff – with no customs union in sight.

Since there would be no disparity between tariff rates, as between imports into the EU and the UK, there would be no occasion when tariffs would arise from application of rules of origin, either in respect of direct exports to the EU or re-exports. Thus, in the automotive industry, parts imported from the EU (or the RoW, on which tariffs had been paid) and then fitted to a finished car and exported would not attract EU tariffs.

Thus, so marginal is the problem that one gets the impression that it is being talked-up by people who want to make a name for themselves in "discovering" something no one else had thought of. For want of being able to address real problems, they are inventing their own.

The really puzzling thing about Renison's report, therefore, is why the IoD has chosen to expend its energy and political capital on an issue of such limited importance.

This is at a time when David Dingle, chairman of the trade body Maritime UK, is complaining that lobbying the government over Brexit is like "banging your head against a brick wall".

He is concerned that the UK infrastructure is not "up to the task" of dealing with Brexit and warns that just a doubling of the time it takes lorries to get through the port of Dover, from two minutes to four minutes, could see permanent 20-mile-long motorway queues in Kent.

Dingle adds: "It seems equally improbable, in the current climate, that there will be a political solution, that there will be an output of a 'deep and special relationship', which will mean that those lorries can continue to flow in an unimpeded fashion".

Keeping the trucks flowing through the ports is going to tax all the resources of the government and, with the growing list of barriers that traders are having to confront, it will be nothing short of a miracle if huge delays can be avoided once any transition period is over.

Therefore, one would have thought that the IoD, along with other trade bodies, would be focusing their attention on the real priorities – which must be the elimination and reduction of non-tariff barriers. Anything else, at this point, must be considered a dangerous distraction.

Renison goes halfway to acknowledging this when she admits that her option "would not remove all the potential disruption for business", an assertion so weak that it's rather like saying that the BEF in 1940 would not stop the entire German Army.

Her next statement also verges on the fatuous, the one in which she says that "the regulatory relationship is a much wider piece of the negotiations" – as if it was actually open to negotiation. We either have a regulatory relationship, or we don't. And not content with that, she adds that her partial customs union will not "remove every current constraint on the UK's economic sovereignty" – as if it possibly could.

For all that, Renison has it that this irrelevant option of hers is a "compromise". Somehow, though, this label seems less than exact. There must be a better way to describe this waste of time and effort that should be way down the list of priorities.

In a sense, though, her report typifies the post-referendum treatment of Brexit – endless energy expended on just about everything except that which is relevant and necessary to deal with our withdrawal the EU. One of these days it might be different but, when it is, I have a feeling that it won't be the IoD leading the way.

Richard North 17/02/2018 link

Brexit: a global future for global newts

Friday 16 February 2018  

The speed with which the Johnson speech is fading from the legacy media is perhaps an indication of its inadequacy. It was supposed to be an agenda-setter but its half-life has been less than 24 hours. By the weekend, it'll be political history.

Mrs May now bears the torch, which will doubtless be prominent when she visits Germany today for what are described (by some) as "crunch talks" with Angela Merkel, and then delivers her much-anticipated speech.

One wonders if our prime minister has learned anything from previous experience and understand that the UK's fate will not be determined in Berlin. The meeting, therefore, may be considerably less important than she anticipates. In any event, the powers of a politically enfeebled Merkel are waning.

As for her speech, the focus on security may play well with our Nato allies – or not. Her government's defence cut-backs and its inability even to commit the promised two percent of GDP to defence spending, may speak louder than her words.

Even if Mrs May's speech has anything genuinely of interest to add on the subject, which is unlikely, it will most likely be seen for what it is – an attempt to distract attention from the intractable problems besetting the Brexit talks.

Mrs May has tried this on before, at Florence, using the issue as a carrot which she hoped would motivate the "colleagues" to forget about the finer points of the withdrawal agreement.

In particular, she proposed a "bold new strategic agreement that provides a comprehensive framework for future security, law enforcement and criminal justice co-operation: a treaty between the UK and the EU". This, she said, "would complement the extensive and mature bi-lateral relationships that we already have with European friends to promote our common security".

The ploy didn't work last time, and she should not expect any better treatment this time round. While security cooperation will be welcome – on the EU's terms – there will be no quid pro quo that enables the UK to trade concessions on market access for commitments to support European security initiatives. The EU simply doesn't work that way.

Mrs May would be better advised to focus on undoing some of the damage caused by her idiot foreign secretary, with his obsession for "taking back control" of law-making, and his belief that the UK can go it alone on regulation.

There is probably no better way of spooking the EU than by indulging in the sort of stupidity that Johnson has made his speciality. Not least is his complete failure to understand that so much trading legislation is of global origin, which we would have to apply whether we were in or out of the EU.

Thus, when Mr Johnson in his speech, made an offhand reference to environmental impact assessments, as an "EU regime", he forbore to mention that the requirement for such assessments stems not primarily from EU legislation. It actually originates in the Espoo Convention which started off life as a European treaty under the aegis of UNECE and has since become a global instrument.

One of Johnson's particular references was to need "to build special swimming pools for newts", an entirely valid complaint that has caused no end of delays and extra costs to building developments.

This was an issue raised by Owen Paterson who noted that, each year over 1,000 licences are issued to keep great crested newts out of development sites, stopping housing being built and costing businesses dearly. One developer in Buckinghamshire had been forced to spend £1 million catching 150 of the amphibians – a species that in the UK is not even threatened.

Yet, they are much scarcer on the continent so, because of this, desperately needed homes in Britain can't be built. But when Mr Paterson, as environment secretary, attempted to secure amendments to the Habitats Directive to relieve British businesses of this burden, the then Environment Commissioner Janez Potocnik refused to open "Pandora box".

Said Paterson, lawmaking in a sane system should not be a Pandora's Box. A huge advantage of leaving the EU is that should we find that our legislation interpreting international conventions did not work well in practice, we could amend or repeal - or if necessary strengthen it - in response to changes in our own species and habitats.

However, even Paterson got it wrong – having like most ministers, and especially Johnson, only a slender grasp of our international commitments. The reason newts are listed in the Habitats Directive is because they appear in Appendix II of the Bern Convention, a treaty agreed under the aegis not of the EU but of the Council of Europe.

That puts the Great Crested Newt (Triturus cristatus) on the IUCN Red List of "threatened species" and, as long as it is there, the EU is obliged to keep it on its own list. Similarly, once we leave the EU, it will remain on our equivalent of the Habitats Directive – which we are committed to re-enact.

Had Mr Paterson been serious in his attempt to deal with the problem, it was not Brussels to which he should have gone, but Strasbourg – home of the Council of Europe - to seek an amendment to the Bern Convention listing.

Since the IUCN "red list" categorises this amphibian as "Least Concern", and acknowledges that it is "widely distributed from the United Kingdom and northern France, through southern Scandinavia, and central Europe", it should not have been overly difficult to have obtained a suitable change, thus reducing the costs and delays to UK developers.

The complex interaction between national, regional and global provisions was something I noted in my study of the Somerset Levels flooding (Appendix 1), and it is something the UK government will need to address before its starts meddling with the law books. Our scope for action in many different areas is far more constrained than most would imagine.

But such subtleties (and complexities) are totally beyond the grasp of the likes of Johnson – and, indeed, any of his cabinet colleagues.

While Johnson himself would prefer to waffle about "carrots" in his own inane way, and the debate in general gets bogged down own in interminable discussions on tariffs and customs union, these are the realities of Brexit that none of the politicians (or the media) are addressing.

Glibly, the foreign secretary talked about "an outward-looking liberal global future for a confident United Kingdom", but in fact he knows so vanishingly little about global governance that his burbling is supremely irrelevant.

So ignorant is he that he doesn't even begin to understand the scale of his own ignorance, allowing him to declare without so much as a blush that, "in a world that demands flexibility and agility, we should be thinking not of EU standards but of global standards".

This is ignorance beyond the reach of any remedy, the typical High Tory malaise where those afflicted are so imbued with their own magnificence that they cannot conceive that there is something they don't know.

These people will go to their graves more ignorant than when they were born, having built through their careers impenetrable barriers against the acquisition of knowledge. They are the people who are wrecking Brexit, simply because – in their own estimations - they know it all and have nothing left to learn.

Richard North 16/02/2018 link

Brexit: Johnson's straw men

Thursday 15 February 2018  

Although the odious Mr Johnson was on the stage yesterday, the person who put him there was his boss, prime minister Theresa May. And that she thought Mr Johnson to be the appropriate person to "reach out" to remainers can hardly improve our view of her political skills.

As for that speech, the best thing that can be said of it is that it has not attracted the same level of unrestrained adulation from the media as previous efforts – apart, of course, from the clueless Telegraph. The Johnson "brand" is not what it was.

Indicative of the monumental lack of judgement, doubtless shared in equal measure by the foreign secretary and his mistress, was the assumption that the remainers should be the target of this love bombing – fortuitously (or otherwise) delivered on Valentine's day.

According to this dismal assumption, it would appear that, in addition to whatever it is that government is doing to carry Brexit through to national success, it is also necessary to reach out to those remainers "who still have anxieties" about the momentous choice the nation has made.

These, Mr Johnson would have us believe, can be neatly categorised into three elements, three bouncy, healthy straw men to keep us entertained.

The first is that leaving was "simply a strategic or geo-strategic mistake". Britain needs to be bound up in the EU for protection – partly for our protection, and partly so that Britain can fulfil its historic role of providing protection for the other countries of the European continent.

The second anxiety is essentially spiritual and aesthetic. Simply, by voting to leave the EU we have sundered ourselves from the glories of European civilisation.

Thirdly – an objection Johnson says occupies most of the debate – there is the economic fear that we have voted to make ourselves less prosperous; that membership of the EU is vital for UK business and investment, and that the panoply of EU legislation has helped to make life easier for companies and for citizens.

People, says Johnson, fear the disruption they associate with change, and that our friends and partners in the EU may make life difficult for us. Sometimes these economic anxieties are intensified by the other fears – about identity or security – so that hitherto recondite concepts like the single market or the customs union acquire unexpected emotive power.

However, if that really does reflect the government "take" on what ails the Brexit process, then we are in bigger trouble than even we imagined. Nowhere is there any suggestion that the real issue is the government's lamentable handling of the negotiations and its complete inability to come up with a credible (or any) exit plan.

Nevertheless, having indulged in this glorious misdiagnosis, Johnson offers what he evidently believes to be appropriate antidotes. The first comes in the form of the same vital reassurance that the prime minister has made so many times, an unconditional and immoveable commitment to the defence of Europe.

Secondly, he denies any suggestion that we are somehow going to become more "insular". And his answer to that is "not to submit forever to the EU legal order, but to think about how we can undo the physical separation that took place at the end of the Ice Age".

This is the man's bid for fame and glory - a second fixed link with France. Even if he accepts that the solution "is still a few years off", this is his "signal" about the attitudes that should inform Brexit. "It's not about shutting ourselves off; it's about going global", says Johnson. "Brexit is about re-engaging this country with its global identity, and all the energy that can flow from that".

In these terms, we are schooled to consider it "vital that we don't treat Brexit as a plague of boils or a murrain on our cattle, but as an opportunity, and above all as an economic opportunity". We would be mad to go through the process of extrication from the EU, and not to take advantage of the economic freedoms it will bring.

Then we get the Johnson sales pitch. We will stop paying huge sums to the EU every year, leaving us with more to spend on our domestic priorities, including the NHS. We will be able to take back control of our borders and we must take back control of our laws.

Remaining within the single market "would to all intents and purposes mean not leaving the EU at all". The British people should not have new laws affecting their everyday lives imposed from abroad, when they have no power to elect or remove those who make those laws. And there is no need for us to find ourselves in any such position.

Of course, says Johnson, we will need to comply with EU regulation in so far as we are exporting to the EU, but in a global marketplace, where we are trading in products that hadn't been conceived even five years ago, serving markets that were poverty stricken 20 years ago, it seems extraordinary that the UK should remain lashed to the minute prescriptions of a regional trade bloc comprising only six percent of humanity wonderful as it may be – when it is not possible for us or any EU country to change those rules on our own.

In so far as we turn increasingly to the rest of the world, he says, then we will be able to do our own thing. We will be able, if we so choose, to fish our own fish, to ban the traffic in live animals, end payments to some of the richest landowners in Britain while supporting the rural economy; and we will be able to cut VAT on domestic fuel and other products.

We can, he adds, simplify planning, and speed up public procurement. We will decide on laws not according to whether they help to build a united states of Europe, but because we want to create the best platform for the economy to grow and to help people to live their lives.

And the crucial thing, he concludes, is that when we are running ourselves – when all these freedoms open before us - we will no longer be able to blame Brussels for our woes, because our problems will be our responsibility and no-one else's.

For me now to critique this dirge is like shooting fish in a barrel. I'm happy to let the Irish Times make the running.

It tells us that Wednesday's speech was, his admirers agreed, a return to form for Boris Johnson after months during which the foreign secretary appeared to have lost much of his sparkle.

All the old trademarks were there: references to ancient history (the Babylonian legal code of Hammurabi); a few words of Latin (post hoc ergo propter hoc); a descent into the demotic ("cheapo flights to stag dos"); and some dubious laugh lines (about sex tourism and "dogging").

But like a retired entertainer on a comeback tour, Johnson struggled to recapture the old magic as the gags fell flat and he stood sweating and his audience stayed silent. As with most flops, the problem lay in the material – Johnson had nothing to say about Brexit that anyone needed to hear.

Ain't that the truth. Johnson had nothing to say that anyone needed to hear. All he had on offer was a collection of tired old straw men.

Richard North 15/02/2018 link

Brexit: a pig's ear out of a story on a plate

Wednesday 14 February 2018  

It's very difficult not to be cynical about the legacy media, and especially when they spend so much time seeking to create the impression of how important that are, while being amongst the last to bring us much of the news – and then so often getting it wrong.

A classic example of this is the saga over vehicle "type approval" certification – the EU-based system which requires the testing of new vehicle types that go on our roads, issuing certification without which none of the models produced can be sold in the EEA.

In the wake of Mrs May's Lancaster House speech, I first brought up this issue in a blogpost dated 10 February 2017. Then, I pointed out that if the UK dropped out of the EU without a deal (something Mrs May thought preferable to a bad deal), the UK's Vehicle Certification Agency (VCA) would no longer be able to issue type approval certificates which would be valid in other Member States.

Furthermore, I wrote, it would no longer be approved to carry out "conformity of production" checks. And, without alternative arrangements being made, existing type approvals would also lapse.

There was no question, in my view, that this would be disastrous for the UK industry. It would be forced to take its products to Member State authorities for type approval, and seek complex and expensive arrangements for production supervision and compliance testing.

Given the additional costs and lack of flexibility, this might prove a powerful incentive for our manufacturers to relocate. It would certainly add to the costs and difficulties in using the UK as a base from which to manufacture cars and export them to buyers in the EEA.

Interestingly, prior to the EU referendum, the House of Commons Transport Committee looked at this issue, and was clearly in denial. When the report came out, shortly after the referendum result, it declared that: "We cannot imagine a situation in which the … approvals by the VCA are not recognised in other parts of the world".

The implication was, quite clearly, that the EU would continue to recognise our certification, to which effect the Department of Transport – the Committee suggested - "will need to work with its European counterparts".

In November last year, another House of Commons committee had a bite of the cherry, this one the Business, Energy and Industrial Strategy Committee. As we recorded at the time, although the issue of type approval was raised, the media completely missed the point. And months later, the Committee itself has yet to report.

It took until 8 February for the European Commission then to issue one of its Notice to Stakeholders, this one headed Withdrawal of the United Kingdom and EU rules in the field of type-approval of motor vehicles.

With the Commission finally having stated the position, it still took two days for the Financial Times to publish a report, by coincidence exactly a year after I had first raised the issue.

Under the headline, "UK car approval agency set to lose EU-wide authority", the self-important Motor Industry Correspondent, Peter Campbell, this told us that "Documents released by the European Commission on Friday stated that 'the United Kingdom approval authority will cease to be an EU type-approval authority” from the withdrawal date of March 30 2019'".

Of course, it would be far too much of a give-away for this august newspaper to report that its information came from a publicly available website and had been published two days earlier – only to be ignored by the bulk (if not all of) the legacy media.

Needless to say, there is none of the detail that explains how the system works, and why the development will be so damaging to the industry. Instead, we are told that "at least five car brands are exploring pulling their business from the UK's government-backed body that approves vehicles for sale in Europe, raising questions over the future of the agency".

This is a bizarre way of framing the story. In short, the situation is that, come Brexit, no manufacturer which relies on type approval from the UK-based VCA will be able to sell its products in the EEA unless, by then, it has made alternative arrangements to get all its models recertified by an agency established in the EU-27. That's the story, and that is what the Commission states in its Notice to Stakeholders.

What the Financial Times emphasises, though, is that "under European rules, cars authorised for sale by one authorisation agency in an EU country can be sold across the bloc". Brands, it says, "are free to chose (sic) any country in the EU to approve their vehicles, even if they do not manufacture in that country".

We then learn that Mini cars, though mostly made in the UK, are approved in Germany, while cars from the Czech Republic brand Skoda are certified in Britain at the VCA.

Car manufacturers, we are then told, "require fresh certificates for new models, which are released roughly every seven years, but also for significant design or engine alterations, which can happen more frequently". This means, writes Peter Campbell, "that all of the car manufacturers that use the VCA will have to find a European alternative within a few years of Britain leaving the EU".

But that is not the case. Campbell has misread the Notice and is massively understating the position. The Commission tells us:
Motor vehicles within the scope of Directive 2007/46/EC may only be registered, sold and enter into service if they are accompanied by a valid certificate of conformity issued by the manufacturer attesting that the vehicles have been manufactured in conformity with the EU type-approval granted by a Member State authority.

For the purposes of Directive 2007/46/EC, "approval authority" means "the authority of a Member State with competence for all aspects of the approval of a type of vehicle, system, component or separate technical unit or of the individual approval of a vehicle; for the authorisation process, for issuing and, if appropriate, withdrawing approval certificates; for acting as the contact point for the approval authorities of other Member States; for designating the technical services and for ensuring that the manufacturer meets his obligations regarding the conformity of production".
The Commission continues:
As from the withdrawal date, Directive 2007/46/EC will cease to apply to the United Kingdom. This means that, as from that date, the United Kingdom approval authority will cease to be an EU type-approval authority under Directive 2007/46/EC. As a result, it will not be possible as from the withdrawal date for a manufacturer to place on the Union market motor vehicles accompanied by a certificate of conformity referring to a type-approval granted by the United Kingdom approval authority formerly competent under EU law.
From the moment we leave the EU, therefore – unless covered by an appropriate provision in any transitional agreement - sales of UK certificated cars in the rest of the EU will no longer be permitted. There is no question of having to seek new approvals within a "few years". This is a "sudden death" situation, with potentially massive consequences.

Campbell, though, meanders through his report, noting that several major brands, including Jaguar, Land Rover, Toyota, Nissan, Honda, Skoda, Peugeot and Citroën use the VCA, each paying several hundred thousand pounds for each new model that is approved by the agency. He then adds:
Two of the brands involved are already in discussions with another European agency to do the work, while another has decided to leave the VCA, according to several people. Two other brands are also considering leaving the VCA though have not selected another European operator, according to one person familiar with the process.
Clearly, that person is not that familiar with the process. The industry is faced with a massive task of transferring the type approval certification for every one of its models to a new authority, at the cost of tens of millions of euros, with no guarantee that the process can be completed by the time we leave the EU.

Furthermore, the EU law requires that industry must appoint representatives established in the Union to represent them before the Member State type-approval authorities.

The Commission states that manufacturers' representatives established in the United Kingdom will not, as from the withdrawal date, be considered as established in the Union. Therefore, UK manufacturers established will have to appoint representatives who are established in the EU-27.

Even though car manufacturers are multi-national companies, this will involve huge disruption and it will require the relocation of much of each manufacturers' regulatory departments to relocate outside the UK.

Nothing of the flavour of this, however, is conveyed by the FT and, to date, the only other news organ which has picked up the story is AoL News, plagiarising the FT and thereby getting much of the story wrong.

As for the FT, even when it is given the story on a plate by the European Commission, it still gets the important details wrong – and comes in a year after we had broken the story.

Even then, the rest of the legacy media has gone to sleep, as indeed have the politicians – who also seem to be unable to grasp the enormity of what it happening.

And thus is my point made: It's very difficult not to be cynical about the legacy media (and the politicians). They and the massed ranks of the pundits are making a pig's ear out of reporting Brexit, doing themselves and us no service at all.

Richard North 14/02/2018 link

Brexit: only its mother could love it

Tuesday 13 February 2018  

Rose Monday, the day before Shrove Tuesday (13 February this year), is an important day in the Catholic German Rhineland district, where a series of carnivals are held, now famous for their political satire.

Traditionally, the usual rules of polite society are thrown out of the window and in Düsseldorf – as elsewhere – that tradition has been maintained in the form of a crude parody of Mrs May's attempts to manage the Brexit process.

The burghers have sponsored a gruesome float with a papier-mâché sculpture depicting the prime minister having just given birth to a three-eyed monster called Brexit (pictured above).

As political comment, this is not very far from the mark, the misbegotten attempts from Mrs May's government so far representing something so grotesque that only its mother could love it. And, if media reports are any guide (not that they often are, these days), we are in for something a whole lot worse.

This is to come, we are told, in a series of speeches – six in all – the first of which is to be delivered by the buffoon Johnson tomorrow in what is being trailed as an "upbeat message" about Brexit.

This will be followed by Theresa May speaking in Munich about Brexit and security on Saturday. She will not, we are reliably informed, be returning with a piece of paper in her hand, promising peace in our time.

Next week we will be suffering David Davis, who will be talking about what leaving the EU means for business. Then International Trade Secretary Liam Fox will speak about trade and cabinet minister David Lidington will explain what Brexit means for devolution.

Mrs May is then schedules for a finale when she delivers a second speech, titled Road to Brexit: A Future Partnership. Despite the title, she is not seeking to emulate Dorothy Lamour and there will be no Bob Hope or Bing Crosby in sight to give the comedy turn.

Comedy in good measure we will be getting nonetheless, with the buffoon set to lecture us on, amongst other things, regulation in the post-Brexit era. This is the man who betrayed his profound ignorance during the referendum campaign, making an utter fool of himself by claiming the existence of an EU regulation which prohibited shops from selling bananas in bunches of more than two or three bananas.

This fine grasp of the issues is – it would seem – to stand him in good stead on Wednesday when he will express that belief that any move to stay as close as a country such as Norway is to the EU (as in the Efta/EEA option) would tie Britain's hands because signing up to the same regulations would limit the ability to strike new trade deals elsewhere.

Clearly, if it is this profound level of ignorance which is driving the debate – and there is every indication that it is – then there is no hope for us at all. The cretins are in charge and will drag us down to their level of stupidity, simply because they are incapable even of mastering the basics of their trade.

Collectively, the May government is being advised, in the secret civil service analysis of the possible economic impact of Brexit, which the government was forced to release to MPs recently, that "Leaving the European Union could provide the UK with an opportunity to regulate differently across social, environment, energy, consumer and product standards".

And if that really is a serious contribution from the civil service, then the rot has spread even deeper than we feared, as the officials ignore decades of globalisation and the ongoing trend towards harmonisation of regulation at a global level. With or without leaving the EU, there is precious little opportunity to regulate differently if we are to remain part of the multilateral trading system.

Johnson's stupidity, however, is set to perpetuate the continued conflict between the "ultras" and chancellor Philip Hammond. He, with his allies, are taking a contrary view and want to retain close economic ties to the EU. Hammond, we learn, is not part of the "speech bomb" but he is jetting off to Oslo, Stockholm, The Hague, Madrid and then Lisbon next week, to discuss financial services and the effects of Brexit.

One area where there is some degree of agreement, however, lies in the area of the need for a transitional agreement, even if there is no consensus as to what it should look like. Since the EU has already put its cards on the table in this respect, the fact that "Team May" are agreed on the need for something that the prime minister asked for in her Florence speech – and to which the EU subsequently responded – doesn't seem to be a whole lot of progress.

What is emerging though is a sort of modus operandi, where the EU tells us what to do, Mrs May's cabinet goes away and talks about something completely different and then, in the fullness of time, Mrs May decides to do what the EU "suggested" in the first place.

Before we get there on the transitional period, it looks as if we're going to have go though tortuous arguments about whether the UK should be looking for something like a Norwegian or Swiss style "off-the-shelf" agreement during this "implementation period", and whether we should delay applying immigration controls.

Going way back to when I was working on the original draft of Flexcit, one mistake I made was to characterise what we were then calling the "Norway option" as an off-the-shelf" agreement.

However, more and better knowledge of the Efta/EEA option – as we now prefer to call it – has us recognising that the uniquely flexible EEA Agreement is in fact the next best thing to a bespoke agreement, allowing for a tailor-made relationship between the EU and the UK, covering our specific needs.

On the other hand, of course, the Swiss option is, self-evidently a bespoke agreement – crafted after the Swiss Federation walked away from the EEA agreement, taking some 16 years to conclude. This is entirely unique to Switzerland and could hardly serve as a model for a short-term transitional period.

We are thus, once more, seeing the same incoherence from government that we have been witnessing ever since the EU referendum in June 2016. The upper echelons of our political system are no further forward than when the votes were cast, having not even defined the basic issues which they should be considering.

For all that, we are beginning to hear talk of a temporary customs union, which would suggest that Mrs May is preparing the ground for her usual climbdown, allowing her ministers to prattle while she gets on with the job of doing what the EU tells her to do.

Today, though, we are led to believe that we will see a "position paper", setting out proposals for "the freest and most frictionless possible trade in goods between the UK and the EU", although early indications suggest that we are going to see nothing that we haven't already seen.

The first proposal suggests a new customs border with the EU could be introduced without disrupting trade – apparently to be managed by the UK, making it the first customs union in the world to be managed by just one country. The second suggests a new borderless customs partnership could somehow be agreed while the UK also signs external trade deals.

Readers may recall that such ideas have already been rejected by the EU as impractical. They are so disruptive to the principles of the Single Market that they would prejudice its integrity, something that the EU could never tolerate them.

That will leave the UK government with nowhere to go, and no options but to follow the line drafted by Brussels, making this yet another waste of time and effort. We end up with a "loveless child" of a Brexit, to which the UK electorate will have to be gradually introduced and thus given time to come to terms with the likelihood that the end of March next year will see Brexit in name only.

In the meantime, we will have to put up with the burbling Boris, and others, while the prime minister's spokesman tells us that it is "time to set out our approach to that partnership, to inform the upcoming negotiations, and to provide citizens and businesses at home and across Europe with a deeper understanding of our thinking".

I suppose such people believe what they are saying, but I would have thought that the last thing the government wants to do is give anybody a "deeper understanding" of its thinking. Not knowing is bad enough. To have our deepest suspicions confirmed could trigger a crisis the like of which we have never experienced.

Richard North 13/02/2018 link

Brexit: understating the case

Monday 12 February 2018  

Flagged up in an article in the Sunday Times yesterday was a letter (spool down) from 34 signatories including the National Farmers' Union, the Food and Drink Federation and the British Retail Consortium, warning that a "no-deal" Brexit would be "bad for UK food".

To say that the letter is bizarre is not untoward, not because it raises the alarm on the effect of Brexit on food and farming but because it fails to do so sufficiently. It grossly understates the impact a hard Brexit is likely to have on the food industry - and farming in particular.

That is not to say that the letter does not raise concerns – it does. A "no-deal" Brexit, we are told – as conveyed by the article which draws attention to the letter – "threatens to raise prices, undermine quality and risk farmers' livelihoods". It would, the signatories say, "be bad for the country's landscape, the economy and our society".

This is in the context of "industry figures" being keen to make Brexit a success, but increasingly fearing that the country will crash out of the EU with no deal. They say it is vital the UK goes on trading freely with the Continent, and call for "free and frictionless" trade with the EU.

This is expanded upon by Nick von Westenholz, the NFU's director of EU exit and international trade. He says that the food sector would face big additional costs under a no-deal Brexit because of tariffs and border checks, adding: "We have high welfare and environmental standards in this country. If we open up our markets, it will be bad for the consumer because there will be less high-quality, British-produced foods".

In assessing this letter, one must pay particular attention to the context which is framed by the authors, where they make particular reference to the "no deal" scenario. And this is what makes it so utterly bizarre.

Forget for a moment anything that has been written on this blog, or my Monograph 17. On 1 February, the European Commission, as part of its "Notice to Stakeholders" series, issued its advice on Withdrawal of the United Kingdom and EU Food Law".

Anyone with the slightest knowledge of how the EU works will know that the food sector is covered by one of the best developed and most extensive of all the EU's specialist acquis, allowing the free circulation of food and animal products throughout the Union.

On Brexit, the UK will automatically become a "third country" for the purposes of EU law, which means that different and provisions will apply. The Notice to Stakeholders sets out in detail the effects of a "no deal" scenario.

What will happen immediately is that much of the labelling on foods produced in the UK will have to change. The official marks can no longer carry the EU designation and in many cases, foods from the UK imported into EU Member States will have to carry the name and address of the importer (which has to be established in EU).

Certain foods cannot be placed on the EU market unless their additives, food flavourings, vitamins and minerals used, and food supplements, as well as any "novel food" has obtained an authorisation by the Commission.

In many cases, the food business operators, authorisation holders, or their representatives have to be established in the EU. As of the withdrawal date, establishments in the United Kingdom will no longer complies with this requirement and the authorisations will no longer be valid. Furthermore, no new applications can be processed through the "competent authority" of the UK.

This alone will have a major impact on the sale of processed foods to the EU, but the most problematical changes of all will affect food of animal origin. As we have pointed out in the blog many times, and now confirmed in the Notice to Stakeholders, on becoming a third country after Brexit, the UK will no longer be listed as a country from which foods of animal origin may be imported.

This alone will mean the complete cessation of imports until such time as the UK is listed – a process which must apply product by product, and sector by sector. There is no single listing applying to all products. And how long that will take simply isn't known. The EU can fast-track certain provisions by, in the main, full listing could take anything up to six months or even more.

On that basis, it would be extremely unwise of the UK authorities (and producers) to assume that, in the event of a "no deal", there will be any exports to the EU of either live animals (including racehorses) or foods (and many other products) of animal origin for a period of up to a year. And that includes movements across the border from Northern Ireland to the Irish Republic.

Even then, all the food establishments (such as slaughterhouses, meat processing plants, dairies, etc.) must be individually recertified before they can recommence exports. Additionally, provision must be made for issuing the veterinary certificates and other documentation that will become necessary and was not required under Single Market procedures while the UK was in the EU.

Then, as the Notice to Stakeholders points out, the food can only enter the EU-through approved "border inspection posts" (BIPs). Each consignment must undergo documentary and identity checks, as well as at an appropriate frequency physical checks – anything up to 50 percent of all consignments – with the payment of an appropriate inspection fee.

And, as we have pointed out many times, there are no BIPs serving the Channel Tunnel or the port of Calais. The nearest BIPs on the French Channel coast are at Dunkirk and Le Havre. Collectively, neither has the capacity to handle but a small fraction of the traffic currently passing through the Channel ports.

Food of non-animal origin will not have quite the same problems – although it must be routed through Designated Entry Points, and again the facilities simply do not exist. Furthermore, official controls at the EU end are organised on the basis of "multi-annual national control plan and in the light of potential risks".

Once we leave the EU, our current multi-annual plan will lapse, and until a new one is vetted and approved by the Commission's Food and Veterinary Office, a high level of inspection will be required – with no provision to execute the required level.

Similar provisions will be required for plants, plant-based material, seeds and bulbs, timber and certain timber products – including many types of wooden pallets currently used on cross border trade. Changes to the rules on what are permitted pallets alone are expected to have a higly disruptive effect.

Another unwelcome twist is that organic foods that require certificates before being placed on the EU market can no longer be certified by the UK authorities, and existing certification will no longer be valid.

Then, as for imports into the EU from the EU, currently, foodstuffs are not checked at the border on entry to the UK. But, if we are to maintain border checks on produce from third countries, under WTO rules, those same checks must be applied to goods of EU origin. And simply, there are neither the facilities not the resources to carry out these checks.

Putting this altogether, there can be absolutely no doubt that a "no deal" Brexit would not just be "bad for UK food". It would be catastrophic. The tight margins and the fragile economics of farming and the food industries are completely dependent on the free circulation of goods within the EU (as it is now).

Without market access, livestock producers and growers would be dealt a massive blow from which they would struggle to recover, while the difficulty in producing supplies would cause huge disruption to the industry and almost certainly trigger shortages in most fresh food commodities.

The question then arises as to why the food and faming interests are so drastically downplaying the damaging effects of a "no deal" Brexit. And here, the explanation is complex.

In essence, though, these sectors – which are highly regulated and also highly dependent on taxpayers subsidies – have developed a conformist "Uncle Tom" relationship with government. They so greatly prize their privileged access to government departments and live in fear of hostile government action, to the extent that they mute any criticism they might have.

On top of that, it has been so long since businesses operated outside the EU's Single Market (and the EEC before it) that the top brass simply have no knowledge of how third country systems work, and the hoops third countries have to go through in order to export to the EU. We have become complacent after the easy life of the Single Market.

Furthermore, many have drunk the "Kool Aid" of the "ultras", believing that the EU will afford us "mutual recognition" and other privileges when we leave the EU. Under the best of circumstances, this is unlikely to happen and, in a "no deal" scenario, it most definitely will not.

Thus, the very last organisations which are going to raise the alarm about the effects of a "no deal" are going to be the trade bodies representing food and farming industries. That they have even written this mild, cap-doffing reproach is itself an amazing development and signifies considerable and growing unease within the sectors.

But generally, this dog will not bark for fear of upsetting its master. The disaster will be upon us before it ups the volume.

Richard North 12/02/2018 link

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