Brexit: impossible means impossible

Thursday 30 March 2017  

Whatever else happen during the next two years, Mrs May's place in history is assured – but, I suspect, not for reasons she would prefer. She has, in her letter to President Tusk reaffirmed that she is going for the impossible.

She has asked Tusk to "work towards securing a comprehensive agreement" and wants to agree "a deep and special partnership between the UK and the EU, taking in both economic and security cooperation".

And not only does she want this, she wants "a bold and ambitious Free Trade Agreement between the United Kingdom and the European Union". Incredibly, "this should be of greater scope and ambition than any such agreement before it so that it covers sectors crucial to our linked economies such as financial services and network industries".

With that, she tells Tusk that the UK recognises that this will be "a challenge" to reach such a comprehensive agreement within the two-year period set out for withdrawal discussions in the Treaty.

But, on the basis of a "unique position" of "close regulatory alignment, trust in one another's institutions, and a spirit of cooperation stretching back decades", and because the future partnership between the UK and the EU is "of such importance to both sides", she is "sure" it can be agreed in the time period set out by the Treaty.

What Mrs May wants, therefore, is a comprehensive agreement "of greater scope and ambition" than any ever tackled – and she want to do it in a fraction of the time even a basic agreement will take, requiring unprecedented speed.

Against this, she claims "trust in one another's institutions", despite refusing to accept even the temporary jurisdiction of the ECJ – thereby displaying a lack of trust in at least one of the EU's institutions.

She calls in aid "a spirit of cooperation stretching back decades", whereas the "colleagues" recall decades of the "British problem", dragging a reluctant partner along in their wake.

Then she believes that this is of "such importance" to the EU, as well as the UK, that the EU's negotiating team is going to devote maximum resource (which it will have to) to achieving a deal in record time – and thereby sacrificing one of their most effective bargaining chips, the pressure on time.

In addition, this relies on the "close regulatory alignment" between the UK and the EU, heedless of the fact that the Telegraph is baying for a bonfire of EU regulations, while yesterday morning, her idiot foreign secretary "applauded the campaign".

That notwithstanding, as I have pointed out earlier, because the UK has already achieved full regulatory convergence does not mean that a new deal should be relatively straightforward and swift. That is completely to understate the complexity of modern trade agreements.

As well as regulatory convergence, there must be a dynamic arrangement that will ensure the automatic uptake of new regulation, and also the changes mandated by ECJ judgements - the very things the UK appears to be abandoning.

There must also be internal market surveillance measures, agreed conformity assessment measures, customs agreements, dispute settlement procedures, agreements on competition policy, procurement and intellectual property rights, as well as systems to deal with rules of origin.

These and much else, will require an institutional structure to facilitate communication and ongoing development, a form of arbitration panel or court, and a consultation body, which allows input into, and formal communication with the EU's regulatory and institutional system.

With modern trade deals, there is also a huge element of conditionality, where parties are required to subscribe to common values on human rights (one of the main barriers to a free trade deal with China), on workers' rights, on environmental protection, wildlife protection and many other incidental matters.

Putting all this together, one can only describe Mrs May's ambitions as beyond stupid. Her unqualified aspirations transcend mere stupidity to become barking madness – without precedence in modern times.

In an earlier post (already linked), I have likened the commitment to securing just a free trade agreement, signed and ratified within two years, as akin to a British commander addressing his troops on Salisbury Plain, telling them they are to invade Iraq the next day – but they have to walk all the way from the UK.

This was my way of saying that a "bold and ambitious" free trade agreement with the EU inside two years is not just difficult. It is impossible. It cannot be done. And it doesn't matter how many times it is discussed amongst the chattering classes, it still can't be done.

And there we confront the true meaning of the word "impossible". It means "cannot be done", and just because a prime minister aspires to it, that still doesn't make it possible. Brexit may mean Brexit but, by the same token, impossible means impossible.

If we could then have graduations of impossibility, to achieve her impossible objective, Mrs May acknowledges that it will be "necessary to agree the terms of our future partnership alongside those of our withdrawal from the EU".

In other words, she wants parallel negotiations, with the Article 50 settlement being dealt with alongside work on her "bold and ambitious Free Trade Agreement". Cue Angela Merkel who, within hours of Mrs May's delivery boy handing her letter to President Tusk, popped up to reject the idea of trade talks running alongside Article 50 secession negotiations.

The German Chancellor told reporters in Berlin: "The negotiations must first clarify how we will disentangle our interlinked relationship ... and only when this question is dealt with, can we, hopefully soon after, begin talking about our future relationship".

Furthermore, any bold and ambitious Free Trade Agreement that "covers sectors crucial to our linked economies such as financial services and network industries" is unavoidably going to be a mixed agreement. It will thus require approval of the European Council and the European Parliament, and will have to be ratified by all 27 remaining EU Member States and the Westminster Parliament, before it can come into force.

On top of that, the EU Treaties will have to be amended, which is a separate issue altogether. This will have to be done by a secession treaty, which comes under Article 48 (TEU), requiring the unanimous approval of all Member States. And if it includes transitional measures that affect the UK (as it most likely will), it will require the approval of the UK Government and ratification by the Westminster Parliament.

And just because there is no one in the media with the brains or knowledge to understand this, and No 10 hasn't set it out in a press release with a spokesman to explain the big words, these facts are unalterable. We are looking not at two formal agreements but three (at the very least).

For once, the media is going to have to get used to the idea that just because they haven't invented this "secession" treaty yet, that doesn't mean that it will not have to be agreed. This is real life we're dealing with here, not Telegraph wet dreams.

Interestingly, Spiegel online is talking about "fantasies from the Brexit country", arguing that the EU does not want to punish Great Britain, but in reality "it cannot help itself". This is because the British "seem to have completely unrealistic expectations".

But "unrealistic" is too kind. We'll stick with "impossible". There is no way on God's earth that we're going to conclude a trade deal within two years. As for a "transitional deal", we are facing exactly that situation described by Mrs May, where we will be "stuck forever in some kind of permanent political purgatory", under the jurisdiction of the ECJ.

Surrounded by idiots, Mrs May has not only kick-started Article 50. She has signed the death warrant for Brexit. This is not going to end well.

Richard North 30/03/2017 link

Brexit: opening the box

Wednesday 29 March 2017  

Thirty minutes after midday, our time, the deed will be done. Mrs May will have caused to have been delivered, by hand, a note addressed to the President of the European Council, formally advising him of the intention of the UK to leave the EU, thereby setting in train the Article 50 process.

This is a move which Her Majesty's Government chooses to believe is irreversible. Whether that is strictly true, no one actually knows. It is as much a political decision as it is a legal issue. And at the moment, the mood music from Brussels suggests they want us gone.

Unless all parties unanimously agree to an extension – which neither side appears to want – this will see us ending our membership on 29 March 2019, notwithstanding that there is always the procedural device of "stopping the clock", which could extend the timetable by a few days.

When we leave we will, automatically, assume the status in our relationships with the EU of a third country. This is not something the EU will do to us – it is something we do to ourselves by leaving the EU. There is nothing personal about it. This is what we become.

Unless we conclude a number of formal agreements with the EU – all of which one might expect to be bundled into the formal Article 50 settlement - we will find ourselves trading within a multilateral framework set by a number of global organisations.

These will include such bodies as the World Trade Organisation (WTO), the World Customs Organisation (WCO), the United Nations and its subsidiary bodies such as the International Maritime Organisation (IMO), the International Labour Organisation (ILO) and the "three sisters" (the OIE, the IPPC and Codex) – to say nothing of UNECE, and the OECD.

That framework will be augmented by many other formal and informal bodies, ranging from G20 and the Financial Stability Board (FSB), as well as ISO and IEC and many other global standards setters.

This means that we will continue to be bound by numerous trading standards which at present are promulgated via the EU and which we will have to implement directly – with additional enabling legislation where appropriate, to ensure that we honour our remaining international treaty commitments.

This totally rules out the sort of stupidity spread over the front page of the Telegraph yesterday (pictured above). For the most part, there is no room to "cut the EU red tape choking Britain", as almost every "rule" the newspaper lists represents in some way or another, international commitments, including the bendy banana "directive", which currently implements CODEX STAN 205-1997, AMD. 1-200.

There are many tales emanating from the Telegraph about the downsizing of the editorial workforce. What we didn't bank on was a downsizing of the collective IQs as well. If they got much lower, we would be watering their journalists, not reading them.

Ironically, just as we are treated to this dose of unmitigated stupidity from the Telegraph, we get Marcus Leroux, Trade Correspondent for The Times, writing under the headline: " Soften Brexit by keeping EU rules, say businesses". Businesses, Leroux writes, are calling for European Union regulations to remain in place to minimise the cost and disruption of Brexit, according to a report by the British Chambers of Commerce.

The BCC says that the government should refrain from the temptation of trying to cut costs for businesses by getting rid of red tape if it could make it more difficult to meet European rules. "Businesses value a stable regulatory framework over disruption and change at a time of transition and uncertainty. They have already taken on the adjustment costs associated with EU regulation and should not face further immediate change", it says.

"All existing EU regulations, where businesses have already incurred the costs of adjustment and adaptation, should be maintained for a minimum period before major changes are suggested, even if the object of change is deregulation and lowering of costs".

That is the reality, and the one we proposed for Flexcit where – as far as possible – the day after Brexit should be no different from the day before. Only very gradually should we begin the process of managed divergence, minimising the perturbation and the economic damage, buying us time to reap the benefits from Brexit.

What is especially disturbing about the stupidity of much of the media, though, is a chilling comment on the back of observations by Michel Barnier.

A Brussels source, we are told, says Barnier's decision to be as open as possible about the talks is in part an attempt to educate the UK public about the dangers of not reaching a deal, and leaving the bloc on what is known as World Trade Organisation terms. "It is not possible to overestimate the threat the UK press poses to reaching a deal. We have to counteract that by being open", he says.

Politicians - on both sides of the Channel – are one of the few groups left who actually believe what they read in the papers. And if the "colleagues", who will be looking for evidence that the UK intends to maintain regulatory convergence, take fright at the incontinence of papers such as the Telegraph, the negotiations will be much harder than they need to be.

With that, the prospect of working solely within the multilateral framework is not an option. These diverse international agreements have to be implemented by local enactments – nation-to-nation agreements or, in the case of the UK and the EU, nation-to-bloc.

It is securing those enactments which need to be the main task of the Article 50 negotiations, the objective being to secure continuity of trade and the preservation of the many other cooperative arrangements which make civilised co-existence between neighbours possible.

Our great problem – and danger – is that there are clearly elements at work who do not want to see the conclusion of a sensible agreement between the parties, and would have Mrs May walk away from Brussels without a deal.

Whether this is from ignorance of the consequences, or from some deeper political motives, is hard to determine. But whatever the driving force, the net effect will be the same – economic suicide.

Despite the accusations from various of the ignorati that we have been exaggerating, or being unnecessarily pessimistic, we are now beginning to see official acknowledgement of the impact of coming away without a deal, when customs declarations rise from 17 to 350 million a year, or more, and inspections in EU ports cause trade to grind to a halt.

All this is to come. Whether "Team Brexit" can avoid the worst outcomes arising from Brexit we have our very grave doubts. There will, of course, be skilled and knowledgeable people in the system, intent on delivering a satisfactory resolution but, if Mrs May has succeeded in anything, it is keeping such people so well hidden that no-one is sure they even exist.

For the rest, stupidity stalks the land. It is visible on the front pages of national newspapers, embedded in many of the London-based think-tanks, everywhere on the internet, and especially on newspaper comment threads which have brought public displays of ignorance and malevolence to a new level.

This may be the ultimate outcome of Brexit. When we wrote The Great Deception, Booker and I used for the epigraph to the whole volume, the comment from Labour Foreign Secretary, Ernest Bevin when confronted with the idea of imposing a supranational government on the peoples of Europe. "If you open that Pandora's box, you never know what Trojan 'orses will jump out", he said.

Now, Mrs May is opening the Article 50 "box". But no Pandora's box is this, from which the evils of the world will escape. In a sense, she will release something worse – the collective stupidity of a nation no longer capable of governing itself and not inclined to learn.

If there is to be hope, the only thing left in Pandora's original box, it rests with the idea that sanity will prevail, simply because it must. But that is a slender basis on which to approach the most important political event for the UK, since the war. Nevertheless, we live in hope.

Richard North 29/03/2017 link

Brexit: several bananas short of a bunch

Tuesday 28 March 2017  

As reality begins to exert its grip and the obvious dawns on people that we're not going to complete trade negotiations within the two-year Article 50 period, more and more ideas emerge on how to deal with the shortage of time.

Apart from the 'oft-repeated suggestion of a transitional period, lasting ten or more years, the latest we're getting via the Financial Times is a report that, even after Brexit day, we may have to continue taking part in some of the EU's decentralised agencies. This is based on the very obvious premise that we simply don't have the expertise in some areas and wouldn’t have the time to start up new agencies from scratch.

We're also expecting the entire EU acquis to be brought onto the UK statute book for an unspecified period of time, together with the adoption of the EU's tariff schedules and special arrangements to ensure continued legislative convergence to ensure access to EU member state markets.

Thus, from the early days when the Ollivander tendency was arguing for Article 50 to be junked and a ten-minute exit plan to be implemented, we are gradually seeing a convergence with the ideas set out in Flexcit plan, most of the ideas in which were emerging over four years ago.

The essential part of the plan was (and is) a recognition that the two-year time period allowed by Article 50 was insufficient to craft a favourable, long-term deal. Therefore, we argued that we should adopt an interim plan, to buy time for something better than we could otherwise get. And, of the various options available, we chose the "off-the-shelf" idea of continued EEA participation, considered the least worst and tolerable in the short- to medium term.

Given the widely acknowledged complexity of the Brexit process, one might have thought that the idea of a careful, measured extraction from the EU might have gained some approval from the broad ranks of both leavers and ex-remainers, especially as the process has been likened to the task of a surgeon carving out a metastatic cancer from the body of a patient.

And of all the people you might expect to support such an option, Sunday Telegraph journalist Christopher Booker might be high on the list. He and I have been a working partnership for over twenty years and our work over the period on EU matters might actually give us some understanding of the difficulties in securing an orderly exit from the European Union.

To suppose that, however, is also to entertain the fiction that we live in a rational world. Sadly, though, we have impinged on a domain infested by a particular type of "leaver" who demands instant fealty to the Ollivander concept of Brexit.

This particular brand is characterised by the belief that the UK can walk away from the EU at a moment's notice, whereupon the EU will give us all we demand by way of access to Member State markets, because "they need us more than we need them".

Such is the dedication to free speech and tolerance of these Ollivadites that any deviation from the approved line is unacceptable, triggering a steady drumbeat of personal abuse at the deviant. Thus, week after week, as Booker has sought to explore the growing evidence of a "plane crash Brexit", he has attracted increasingly frenzied attacks from these self-appointed guardians of the sacred flame.

What is especially interesting is that, uniquely, the claque have decided that criticism of this all-important area of public policy is off-limits. Anyone venturing to suggest that there is anything amiss with the Government's stance on Brexit become a devotee of "project fear", a closet (or actual) remainer and even a traitor to the cause.

This has culminated in a weird piece in a minority website written by self-styled journalist Walter Ellis, who heads his work "The strange case of 'Bregretter' Christopher Booker".

Not ever having talked to Booker on this, Ellis decides that Booker, from having been the "patron saint of Leave" is now so overcome by what he terms "a fit of historical guilt" that he has become something altogether unspecified, thus allowing Ellis to ask his readers "to cut off my legs and call me shorty". 

The one substantive observation Ellis seems to make is that, "the trolls who once hailed Booker as the one who would prepare the way for a new beginning are turning on him as a traitor to the cause", a phenomenon he seems to regard as unsurprising.

Such is the dominance of these rightly named "trolls" on the Booker comments that they have become a singularly unpleasant place to be. Any attempt to confront their prejudices is bound to fail as, having been put in their place, they return the following week, with exactly the same assertions they had used previously, seasoned by unrestrained (and unmoderated) ad hominem interventions.

They appear also to be given some sustenance by the Sunday Telegraph letters column which for several weeks now, has entertained hostile letters, usually on the familiar lines that "Booker is wrong".

If nothing else, this change in demeanour by the tiny minority of readers who actually comment online on the Booker column illustrates the tendency of such readers to seek from their favoured websites confirmation of their prejudices.

Many of them have names known to us, people with their own agendas, often Ukip activists. Their strident and persistent attacks on dissenting voices ensure they have the comments to themselves, where they set up shop, roundly to condemn Booker each week. Rarely though do we see any of them on the comments for, where they might get more robust handling.

The essence of the commentary, though, is that it betrays people who are not very bright. Mostly, as the saying goes, they are several bananas short of a bunch, confining themselves to a limited repertoire of mantras, tediously repeated at every opportunity.

Not one shows any sign of understanding the central concept of Flexcit and, while many are quick to condemn the Single Market, the idea that we should organise a measured withdrawal, to minimise economic damage, is way beyond their paygrade. Anything short of immediate, unconditional withdrawal is regarded as evidence of "remainer" sympathies.

When it comes to weird, though, even Ellis pales into insignificance compared with Iain Martin. On his way to sneering at the Observer in what he laughingly calls "quality journalism", he comments on the "case of Christopher Booker" which he asserts is "most strange".

"Booker was, along with his associates, a robust voice for leaving the EU for many years", he says. Now he writes it will be a disaster because we are leaving the customs union and because NO-ONE WILL LISTEN TO HIM AND HIS FRIENDS, or something".

The capitals are from Martin, who then goes on to say: "Let's face it. There is a strand in the Eurosceptic movement that liked being a minority interest. There is a similarity there with music fans who like showing their alleged superiority by being into an obscure act. What they hate most is when other people start buying the records of their hitherto little-known favourites".

That is the other element of the Booker critique – the poverty of intellect that drives writers to close in on themselves and address personal issues.

The politics of Brexit are to Martin what red and green are to someone who is profoundly colour blind. He has no comprehension, not the slightest glimmer of understanding of the subject matter of which Booker writes.

And that, ultimately will be the tragedy of Brexit. Here is a fascinating, complex issue which, potentially, is set to re-energise politics – but at huge risk, imposing burdens on politicians that they are ill-equipped to deal with. But, to anything other than black and white, without not even the nuances of shades of grey, these people are blind.

Decades of immersing themselves in personality politics has atrophied their brains, leaving them with nothing of interest to say.

Richard North 28/03/2017 link

Brexit: back to darkness

Monday 27 March 2017  

With quite extraordinary sloth, the media is gradually waking up to the disaster that is about overtake Brexit, although – as yet – there is no recognition of the scale of what confronts us. 

The glimmer of consciousness appears in The Sunday Times which tells us that "Brexit customs checks could land UK with 24% price rise", an issue that could arise "even with free trade deal".

And it is this which is the virus which bring the system down. Regardless of the outcome of the Brexit talks, customs procedures will apply to UK exports to the EU. There is no could about it – customs procedures will apply.

The essence of what The Sunday Times is then reporting – based on a "leaked government document" – is that the exports will be subjected to "burdensome procedures" at EU ports.

This (albeit limited) intelligence comes in a briefing from Alex Pienaar, head of EU exit policy for HMRC. He says that, "any form of customs controls will increase the costs to businesses and consumers of imported and exported products", adding that these costs "can be both financial and measured in time/delays".

What we have here is the first official acknowledgement of problems to come. And, in a separate piece, we also see recognition that: "the situation would be particularly onerous for those exporting food and other agricultural products into the EU with delays of up to a week for meat tested at official laboratories".

This, though, is only the half of it. Known to The Times but as yet unreported is the drastic lack of capacity in the EU's Border Inspection Post system. We need to stop messing here. This means that UK food exports, involving any fresh meat, products of animal origin (including cheese and other dairy products) or vegetable product, will effectively cease from Brexit day onweards.

Throughout the country, the broader effects will be variable. Perversely, the sector least affected will be finished motor vehicles exported to the continent. Large car transporters can carry several thousand vehicles, which can be treated as one consignment (or a limited number of consignments) for customs purposes.

Furthermore, things like bulk chemicals and bulk grain exports will be fairly easy to process – although the REACH problem is something else that must be addressed, before chemicals can be exported to EU Member States. Otherwise, these products will not be released for free circulation. They will be barred from entry.

The real problem is the ro-ro traffic, the 16,000 or so truck per day which rely on roll-on, roll-off ferries, departing mainly from Dover and via the Channel tunnel, but also from ports such as Plymouth, Tilbury (the London Container Port), Felixstowe, Hull and Immingham.

At the very least, each truck becomes a consignment in its own right, requiring customs clearance . But, substantially aggravating this problem is "groupage" – mixed loads which account for anything up to 30 percent of the traffic, averaging out at 20 consignments per load.

The enormity of this has not even begun to register as that adds to the customs burden more than 100,000 consignments (rather than loads) daily. The paperwork alone will be crippling.

For the UK, the problem is that customs controls will go far beyond straightforward documentation checks. They must do. The UK assumes third country status and the EU must treat us the same as they do any other third country. To do otherwise would have the EU not only in breach of those famous WTO rules, but also in breach of its own.

The same, of course, applies the other way round. The UK can (and will have to) apply its own customs code but, under WTO rules, it cannot treat goods from the EU any differently than those from any other of its trading partners. Nor, practically, could it do so. We depend absolutely on imports for our physical survival – unlike the EU.

Speaking of customs codes, the last time the UK had complete independence in framing its own customs controls was 1972. Since then, progressively, and with increasing force, the UK has handed over the formulation of its customs controls to the European Union.

Over those many years, the world around us has changed so that, what once was would no longer be enough. Simply going back to 1972 and picking up the threads is not an option. We will need a brand new code and anyone who thinks this task can be completed and road-tested inside two years is deluding themselves.

Back to the main event, come Brexit day plus one, EU customs controls will apply to UK goods exported to EU Member States. The controls on ro-ro traffic will, perforce, slow down movement through the ports and, as we have seen many times before, even the slightest perturbation leads to massive queues.

There is no point in saying that we can then adjust to this new situation. Ro-ro traffic hardly existed before we joined the EU. Its exponential growth is a direct consequence of the Single Market. Take away the Single Market and its absence of customs controls and the system can't function.

On the day, therefore, as the system slows down, the queues start. Vehicles late going out become late returning. But, as the system backs up, the ferries and the trains are unable to discharge their loads. The queues then start the other side of the Channel and the system grinds to a halt.

At this late day, though, we have City AM retailing the views of Guy Platten, chief executive of the UK Chamber of Shipping. He says:
An enormous £120 billion of goods moves through Dover alone each year, the vast majority of which is bound for or originates from European markets: that's 17 percent of the UK's total international trade. But if barriers – namely customs declarations and inspections – return at our ports, each of those lorries will have to wait while the paperwork is sorted, perhaps for several hours.

Here is the issue: neither British nor EU ports have the space, never mind the facilities, to park large numbers of lorries. If no positive deal is secured around the negotiation table, then within hours of Brexit finally taking place huge traffic jams will spill onto motorways on both sides of the Channel.

Nothing will disincentivise trade quite like "Operation Stack" becoming a daily occurrence. The "just in time" economy will be replaced by a "we'll see you when we see you" economy, and it could well see exporters and customers alike wondering whether the hassle of trading is worth it. That's a recipe for job losses and economic decline.
Even then, the newspaper gets it wrong, with the facile headline: "Britain risks enormous trade disruption without Customs Union pragmatism post-Brexit". This is nothing to do with the customs union. Freedom of movement and abolition of customs controls comes with the Single Market.

But the point missed is precisely the point of this piece. Come what may, we will be seeing the re-imposition of customs controls. What is absolutely staggering is the almost wilful refusal to confront this, the inevitable consequence of adopting anything other than continued EEA participation (and even that would present problems).

Thus, Platten himself gets it wrong. He labels his own narrative "the worst-case scenario", declaring: "there is every reason to believe it will not come to pass". In fact, there is every reason to believe that it will come to pass.

Of customs checks, he says: "Negotiators can choose to bring them back, and suffer the costs on both sides of the Channel. Or, simply, they could choose not to – protecting jobs and prosperity, not to mention the sanity of businesses and customers, in the process". But no, there is no choice. On leaving the Single Market, we automatically become a "third country". Customs checks automatically follow.

That much is now clear from having a senior customs official finally admitting, in a document marked "sensitive", that there will be such checks and that: "any form of customs controls" will give rise to financial costs and delays. You can bet it's "sensitive".

What he doesn't do is spell out the consequences and, because he doesn't, the newspapers, whose journalists no longer have minds of their own, have nothing to report. They need a "big beast", dripping with "prestige", to lay it out for them and then it will hit the front pages. The legacy media will finally "reveal" something we've already worked out for ourselves, and known for years.

For the moment though, because the prospect of logjams at the ports hasn't been plastered over the front pages of the legacy media, the problem doesn't exist. Nothing exists until some clever journalist has "discovered" it – usually by being told about it from a prestigious source.

However, the fact that officialdom and the media – as well as the politicians - have decided to go into ostrich mode does not mean that the problem does not exist. And, whatever happens, it is bound to stress the system. On the other hand, there are many mitigation measures that could be taken, but none of these can be advanced while everybody is in denial.

Just the technical problems alone require us to work on a war footing, with high-powered working groups and committees in action night and day to devise a solution, chivvied by a prime minister with "action this day" directives.

And that is what is really worrying. Whatever else Mrs May is, she is no leader. She shows no signs whatsoever of galvanising the resources of the state and making things happen to an impossible deadline.

Brexit, welcome though it is, was always going to be a problem of unprecedented proportions. Within the two-year timescale, it was going to require heroic measures to avoid substantial damage and disruption to the economy, in an endeavour where the default value is expensive failure.

Effectively, already, it is too late to minimise the damage. We are now bound to take a hit. And the longer it is left, the longer people remain in denial, the worse it is going to get.

For my part – and for many like me – we need to say that this is not what we voted for. It is not what we wanted. The Kamikaze Brexiteers may revel in they destruction they are seeking, but the best we can say for them is that they know not what they do.

As its worst, a botched Brexit could rival the Great Depression in its effects on the UK economy, returning darkness to the land. At its height, the 1929 depression cost the US some 30 percent of its GDP. We could so easily approach those levels and, knowing the capability of economists to make accurate predictions, there is nobody who could say with confidence that this can't happen.

Destroying our external trade is as good a way as any to trigger an economic depression. Our Brexiteers seem determined that we should have one. Our government seems happy to give them one.

Richard North 27/03/2017 link

Booker: those dangerous Ultras

Sunday 26 March 2017  

Slowly, the pieces are falling into place, so much so that Booker in this week's column, offering two Brexit-related stories, one on those dangerous Ultras and the other on the possible effects of Brexit on Formula One (pictured).

Starting the first story, he reflects that when future historians come to analyse how Britain chose to leave the EU, nothing may intrigue them more than the way Theresa May was influenced by a small, well-organised group of Tory backbenchers, including Michael Gove, Iain Duncan-Smith, Owen Paterson and Steve Baker.

It was, he says, these "Ultra-Brexiteers" making up the "European Research Group" who persuaded her that we should leave the single market, the customs union and the European Economic Area, to go instead for a unique "free-trade deal". And if we do not get what we want, we can just walk away, in the belief that "no deal is better than a bad deal".

Two weeks ago, under the heading "The hidden disaster in Mrs May's Brexit plan", Booker warned that this could lead to consequences of which the Ultras seem wholly unaware. Last week this was confirmed by Michel Barnier, the head of the EU's own negotiating team.

He not only emphasised that the talks could not even begin without Britain agreeing to pay over the years ahead up to £60 billion for ongoing financial commitments we have already agreed to.

He then spelled out the consequences of leaving the electronically-based system which currently allows 12,000 British trucks a day to enter the rest of the EU with no delays. As Barnier put it, we would "ineluctably" be faced with a whole thicket of "binding border controls" which would soon lead to "queues of trucks at Dover".

In fact Barnier tactfully did not give the full picture here, by suggesting that this might only happen if we walked away to rely just on "WTO rules". EU law is clear that there can be no "free trade deal" which would allow us to remain in that electronic system which spares us border controls, because this is only open to countries in the EU and the European Economic Area we have decided to leave.

In other words, those who talked Mrs May into taking this course don't begin to realise the scale of what this would lead us to. But they have somehow kidded themselves into believing that this is what 52 percent of the British people voted for.

The irony is that there is no argument we have heard more often over the years than that what we were told we were joining back in 1973 was just a "Common Market", a trading arrangement.

That is what people wanted to go back to, without all the political stuff that came later. If it had been honestly explained last summer that leaving the EU would mean not just saying goodbye to all the political stuff but also the sight of trucks backing up from Dover to London, and thousands of exporters finding it impossible to continue trading with the EU at all, a hefty majority would have voted to Remain.

But that was not what the Vote Leave campaign (now transformed into the European Research Group) ever told us. Because, as their deliberately vague and lamentably ill-informed efforts last summer showed, they had very little idea of what they were talking about.

And here's the rub. Booker – like many of us – has found that many who voted to leave the EU had not done so because they had been convinced by the childishly dodgy arguments put forward by Vote Leave (such as that ludicrous slogan on the bus about giving £350 million a week to the NHS).

Rather, they had done so for their own more or less well informed reasons. But it is now these self-same Ultras who have Mrs May's ear as she heads off this week to trigger Article 50. When those future historians come to analyse the story, it is not only their role which will intrigue them. They will, concludes Booker in this article, also be chronicling the catastrophic shambles that was the result.

This, though, is only part one. In his second Brexit-related story, asks: "Will Brexit bring spell doom for Britain's F1 success story?"

As a new Formula One season opens today in Australia, he writes, another of the countless problems Theresa May's advisers won't have told her about is the devastating effect their Brexit strategy is likely to have not just on Formula One itself but on one of Britain's world-beating industries.

Not everyone may be aware just what a dominant position Britain enjoys in motor racing. Seven of the ten teams currently competing in Formula One (including Mercedes) are based in England. Since 2005 all but one of the world champions has driven a car designed, engineered and built in this country.

Each team employs hundreds of highly-skilled workers and 41,500 other businesses depend on them. The whole industry earns for Britain £9 billion a year. But what will happen when we leave the customs union?

This season, six Grands Prix are on the continent, each requiring the speediest transfer from the UK of 45 HGVs, carrying cars, spares and a mass of equipment. The moment we are excluded from the electronic system which allows them to travel without delays, they will face border controls.

For occasions when there is only a week between back-to-back Grands Prix, such time-consuming procedures will make these transfers barely possible. For the trucks which carry food to entertain sponsors at lavish "hospitality" events it will be even worse.

Under the law, they will have to divert to an EU Border Inspection Post, to wait perhaps for days. The F1 teams may not yet have woken up to the problems Mrs May is choosing to land them with. But they may have reluctantly to conclude that one of Britain's most successful industries will have to leave these shores.

Once more, of course, neither of these stories are news to readers, although it was The Times which broke the story on the behaviour of the Tory "Ultras" and their grip on Mrs May.

Predictably, in the hands of Booker, this attracts the litany of adverse comments on the on-line versions. Mostly, though, these seems to be largely the same people as last week and the week before – tortured souls who have nothing better else to do with their time than vent their spleens in response to Booker not telling them what they want to hear.

Yet. after Booker wrote his piece which referred to the effect of Brexit on horse racing, a number of other newspapers followed in his wake. It will be interesting to see whether others follow his F1 story and whether they are able to make a decent fist of it.

By mid-week, when Mrs May despatches her Article 50 notification, the focus will be on what she has said to the "colleagues" which, we understand is merely to be a rehash of her twelve-points speech. And if that is the case, the fun won't really start until the end of next month, when we get the response.

In the meantime, all we can do is analyse and report on the events, as we see them – and largely ignore the adverse comments. Largely, they are repetitious to the point of tedium, so that is no great hardship. By now, we've seen it all before.

Richard North 26/03/2017 link

Brexit: The Great Deception

Saturday 25 March 2017  

When the "colleagues" needed to regroup after the shock of the EU Referendum, they went scurrying off to the Italian island of Ventotene to lay flowers at the tomb of Altiero Spinelli, long considered to be one of the founding fathers of European unity following World War II.

Ventotene, of course, was the prison island where Spinelli wrote his famous Ventotene Manifesto in which he set out his vision for a "European Federation". But, as to how that should come about, we need look no further than this passage in his Manifesto:
During the revolutionary crisis, this movement will have the task of organising and guiding progressive forces, using all the popular bodies which form spontaneously, incandescent melting pots in which the revolutionary masses are mixed, not for the creation of plebiscites, but rather waiting to be guided.

It derives its vision and certainty of what must be done from the knowledge that it represents the deepest needs of modern society and not from any previous recognition by popular will, as yet non-existent. In this way it issues the basic guidelines of the new order, the first social discipline directed to the unformed masses. By this dictatorship of the revolutionary party a new State will be formed, and around this State new, genuine democracy will grow.
In other words, as we wrote in The Great Deception, "the people" were not to be involved in the construction of this new state. Popular assent would be sought only when the project was all but complete. At that moment their "crowning dream" would be the calling of a "constituent assembly", to "decide upon the constitution they want".

The drawing up of the constitution would be the final act in the emergence of the "United States of Europe". Only then, within the framework of the new state which had been brought into being, would "democracy" be permitted to resume.

Fast forward now to Jean-Claude Juncker, President of the European Commission, writing in the Guardian on the eve of the 60th anniversary, who sees fit to tell us that:
European integration was always a project created by the people, for the people. It was a movement carried by a generation who came together to proclaim: "Never again!"
That this was "always a project created by the people" is beyond the pale. It is a blatant lie. And it is times like these that one is reminded why we invested so much in the campaign to leave the EU. Not for nothing did we call our book The Great Deception: the whole history of le projet is one based on deceit, where even the official hagiography is false.

So ingrained has it become though that the perpetrators, like Juncker, actually believe their own propaganda. He is no doubt convinced that the EU (and the institutions that came before it) were indeed "created by the people" - he has bought into the deception.

Confronted with this, there is no point in arguing, no point in engaging. The intellectual corruption is so deep that it is not possible to root it out. The narrative is locked in and beyond change.

We see something similar with Denis MacShane writing in the Independent, repeating the same old canard about Britain's original refusal to join the Six in setting up the EEC. He asserts:
The planning meeting for the Treaty of Rome took place on Messina in 1956. Again the British prime minister was absent. Instead, a Board of Trade official was sent, who told the Europeans present at the creation of what is now the EU: "Gentlemen, you are trying to negotiate something you will never be able to negotiate. But if negotiated, it will not be ratified. And if ratified it will not work". Thus spake Britannia.
The account is pure fiction, not least because there was no British representative at the Messina meeting which, in any case, took place in 1955. MacShane is referring to the proceedings of the Spaak Committee held in Brussels, and a steering committee meeting held on 7 November 1955. It was at this meeting that a Board of Trade official, Russell Bretherton, made a pre-planned announcement that Britain was to withdraw from the talks on the common market.

The way in which he communicated this has become a legendary episode in the history of Britain's relations with "Europe", subject to the most bizarre historical disagreement.

Booker and I review this episode in detail in The Great Deception and, on the basis of official documents, found that there was never any question of the UK joining the EEC. The decision had already been made, well before Bretherton gave official notice.

In fact, there was never any expectation at the time that the UK would join. Writing in his own memoirs, Spaak himself refers to a memorandum dated 19 December 1955, addressed to the German government. It declared that "…it is our view that Britain cannot join such a project". The lurid accounts of the UK "walking out" are invention.

This, though, typifies the entire UK experience – myth, deception, obfuscation and invention. When we did finally join the EEC, Heath was fully aware of what integration with "Europe" entailed. Shortly after Parliament approved Britain's entry, word came from Paris that Pompidou was proposing that member states should make a solemn agreement to "move irrevocably to economic and monetary union by 1980".

In the 1995 BBC documentary The Poisoned Chalice, Sir Roy Denman, present at the time, recalled the foreign secretary, Douglas Home, looking askance at this news. He said to Heath: "The House isn't going to like this". "But that", Denman recalled Heath replying, "is what it's all about".

When Heath himself was asked in 1995 by the BBC whether he could really have said such a thing, he made no attempt to deny it. His only response, after an unsmiling pause, was, "well, that's what it was about".

As we progressed through the years, however, the Conservative Party went into denial. It developed its own narrative, settling on the line that we had joined a trading bloc which somehow has lost its way and got sidetracked into pursuing its ambitions of political integration. This allowed yet another myth to prevail that, if only the politics could be detached from the trade, our relations with "Europe" could be stabilised.

Bizarrely, now that we have decided to leave, the hard core Tory "Ultras" want to ditch trade as well and break off relations with the EU completely. The old narrative has lost its force and we are in the grip of a new obsession.

That makes the BBC documentary title so apt: The Poisoned Chalice. Everything touched by le projet becomes poisoned, distorted and perverted. It is destroying our politics and corrupting our national life.

Diplomatically, Mrs May's has elected not to attend today's anniversary celebrations in Rome. That is one thing she has got right. She is better off out of it. We are all better off out of it. Nothing good has ever come from our participation in the The Great Deception. Mr Juncker has done us the great favour of reminding us why we had to leave.

Richard North 25/03/2017 link

Brexit: trading (not) under WTO rules

Friday 24 March 2017  

In an extraordinarily botched effort, even by his standards, Michael Burrage has again produced a Civitas report, this one purporting to show that, for the UK in the forthcoming Brexit negotiations, "it's quite OK to walk away" from a deal. Trading under WTO rules, he asserts, "is an acceptable solution for the UK".

To reach this astonishing conclusion, Burrage has to undergo quite remarkable intellectual contortions, comparing the export performance of countries with bilateral deals to those which, he says, trade only under WTO rules.

The point, of course, is that his selection criterion for the supposed countries trading under WTO rules is flawed. Burrage assumes that any country that does not have what he calls a "bilateral trade treaty" with the EU (and he identifies 111 of them) necessarily trade only under WTO rules.

Manifestly, this is not true, and at two levels. Firstly, Burrage is imprecise in his use of terminology, referring to the term "bilateral trade treaty" when he actually means "regional trade agreement", specific types of trade treaties which parties notify to the WTO. Such treaties involve the reduction of tariffs and quotas and must encompass "substantially all trade".

Secondly, Burrage is working on the false assumption that such trade treaties are a binary issue – that in terms of trade, countries either enjoy regional trade agreements or they have no agreements at all and therefore trade only under WTO rules. In other words, Burrage posits an "all or nothing" scenario.

In fact, according to the EU treaty database, the EU has concluded 928 bilateral and 263 multilateral agreements with countries throughout the world, making 1,191 in total. Of these, 440 are trade agreements or deal with trade-related matters.

Many of these trade or trade-related agreements cover countries which, Burrage asserts, trade with the EU only under WTO rules. One example of this is Brazil which in 1992 signed the Framework Agreement for Cooperation between the European Economic Community and the Federative Republic of Brazil, an agreement which came into force in 1995 with "infinite" duration.

Its objective is to expand and diversify trade between the parties and to step up cooperation in trade, economic matters, science and technology and financial matters.

Described as "very flexible and pragmatic", it replaced the 1982 Agreement, extending cooperation to new areas (social matters, health and intellectual property), providing for broader economic cooperation with the aim of fostering trade to the maximum extent and of promoting industrial cooperation.

It works through an ongoing Joint Committee, composed of representatives of the EC and of the Brazilian government, which has the task of ensuring the proper functioning of the Agreement and of coordinating activities in relation to the aims of the Agreement.

That agreement, though, does not stand alone. Development co-operation issues are dealt with at both the bilateral EU-Brazil and the biregional EU-Mercosur levels. In January 2004 the EC and Brazil also signed an Agreement for scientific and technological cooperation to develop and facilitate cooperative activities in areas of common interest. The EU's political dialogue with Brazil mainly takes place through EU-Mercosur institutional mechanisms.

In addition, Brazil and the EU engage in multilateral fora such as the UN, the EU-Latin America and Caribbean Summit process, and the Rio Group, while the EU also offers tariff and quota concessions on certain products.

What we see here typifies the type of arrangement the EU has with many countries - a composite of specific bilateral treaties, reinforced by some trading concessions, all working alongside multilateral agreements. In all, Brasil has 13 bilateral agreements and 51 multilateral agreements with the EU, making 64 in all – most of which lie outside the WTO and include such organisations as the United Nations and the World Customs Organisation (WCO).

Not by any measure or in any way can Brazil rightly be said to trade with the EU only under WTO rules – yet that is precisely what Burrage claims to be the case.

Further, he makes similar claims with other countries, including the United States, which has 38 EU-US "trade deals", of which at least 20 are bilateral, and China, which has multiple agreements with the EU - 65 over term, including 13 bilateral agreements, ranging from trade and economic co-operation to customs co-operation. None of these are of the simple, tariff reduction variety.

In his 178-page document, therefore, Burrage fails completely to support his thesis. On the basis of the evidence he provides, he cannot rightly argue that the UK will prosper if it trades only under WTO rules with the EU, because the examples he offers do not represent countries which trade only under WTO rules.

This is a man, incidentally, who claims of Flexcit, that we assume that the Single Market has been of very great benefit to the UK economy and then suggests that, if we "really hoped to make a convincing case against trading with the EU under WTO rules", then we "should have examined the countries that have been doing just that over the 23 years of the Single Market".

Perhaps we might have done so, except that there is no developed economy on the planet which trades with the EU only under WTO rules. And that makes Burrage's thesis totally misplaced and completely meaningless. This rather stupid man has proved nothing other than his complete inability to conduct serious research.

In that respect, Pete treats this charlatan with more respect than he deserves, giving him the courtesy of dissecting and analysing his arguments. But this is such low-grade dross that it should not detain any casual reader more than nanoseconds. Civitas should be thoroughly ashamed for adding its name to it – assuming they have the wit to realise what a mess they have spawned.

Speaking of dross, though, we also have Jonathan Portes over on the Guardian, also asserting that "we already trade under WTO rules with the US". Portes is professor of economics and public policy at King's College London, and a senior fellow of the UK in a Changing Europe programme – and thus provides more than adequate confirmation of the fact that "professor" is a job description, not a qualification.

He now adds his own brand of stupidity to that of Matt Ridley, Liam Halligan and many more, including Michael Burrage, none of whom seem to have the brains they were born with.

Such is the obsession of these people with the fictional WTO status, though, that one might be inclined to take a conspiratorial view of their activities – all of them popping up in what looks like a concerted attempt to lodge the WTO option in the minds of the public as a sensible answer to Brexit.

The emergence of the highly organised right wing Tory "Ultras" may have something to do with this, and it has been suggested that they need to clear the decks of any encumbrances with the EU in order to pave the way to closer ties with the United States.

Whatever their motivation, they have a stronger grip on Mrs May than is healthy and, with their distorted claims and cavalier approach to evidence, are poisoning the Brexit debate.

Nevertheless, so convinced are they of their own rectitude that they actually believe their own propaganda. They have lost sight, therefore, of the danger to their own Party if they get their way with the WTO option and trash the economy.

Burrage, who seems to think that Booker writes for The Daily Telegraph - such is his attention to detail – thinks this far-fetched, and accuses Booker of adopting a "hysterical tone".

But since neither he nor any of his WTO Option cronies have been able to make a credible case for their obsession, we have good cause to be worried. And if these people are so desperate to misrepresent the facts, we must be on to something.

Richard North 24/03/2017 link

Brexit: the order of things

Thursday 23 March 2017  

I guess we're going to see a lot of Michel Barnier over the next few years – unless the European Council exerts itself next month and decides on someone else to lead the Brexit negotiations for the EU.

For the moment, though, he's in full flow, speaking at the plenary session of the European Committee of the Regions on: "The conditions for successful negotiation with the United Kingdom".

What grabbed the headlines before attention turned to events at Westminster were his comments on "queues of trucks at Dover", cast by the Financial Times as having Barnier warn of "queues and shortages if Brexit talks fail" and fleshed out by Deutsche Welle with his warning that:
… the absence of a deal could lead to long queues of trucks at British port city Dover, disruption of flights to and from the UK and a shortage of nuclear fuel for Britain's nuclear power plants.
Whether it was intentional, or just bad drafting, though, it cannot have been correct to state that "the reintroduction of binding customs controls, which would ineluctably slow down our trade and generate queues of trucks at Dover" is [exclusively] a consequence of an "absence of an agreement".

Come what may, with the advent of Brexit, we will see "the reintroduction of binding customs controls", the effect of which – as Barnier correctly observes - would "ineluctably" slow down our trade and generate queues of trucks at Dover.

"Ineluctably" is an interesting word for Barnier to use, more so when English is not his first language, although there is a direct parallel in French: "inéluctablement". Both mean the same thing: unable to be resisted or avoided; inescapable. One could also use the word inevitable.

The only real issue in this context is how bad the effects are going to be. Even at best, delays of a few hours will become the norm. But the worst case – and entirely tenable – scenario is that trade through Dover (and the Channel Tunnel) will grind to a halt as customs systems collapse under the sheer weight of traffic.

The interesting thing though is that Barnier can see it as a problem. It was quite evident to us in June 2015, a full year before the referendum, when we were warning Dominic Cummings, even as he was scheming to pervert the "leave" campaign and build the arguments on a platform of lies.

The result, though, is clear enough to Barnier. The United Kingdom, he says, has opted to leave the internal market and the customs union. It will be a third country in two years. And, in making this choice, the UK will find itself mechanically in a less favourable position than a Member State of the Union. Nor will it be able to participate in the Single Market.

This sets the seal on our future trading relations – and we can't say we weren't warned. The vulnerability of Dover to delays brought about by border checks is well known – reported on by the Home Affairs Committee in December 2014.

MPs and ministers can have no excuse for assuming things will run smoothly, and especially not journalists, even if the idiot Halligan is still prattling about the UK being "fine" if no EU deal is struck and we instead use WTO rules.

By coincidence yesterday, we also saw publication by the Lords EU Committee on the effect of Brexit on trade in non-financial services, tucked into which we see an observation that WTO rules would not "ensure the free flow of data".

In the body of the report, it refers to the Data Protection Directive 95/46/EC stipulates that the processing of personal data within the EU is subject to standards of transparency, "legitimate purpose" and proportionality.

Those who collect and process personal data ("data controllers") must protect it from misuse and must respect the rights of those who provide their personal data (‘data subjects’), for example by gaining their consent.

In 2016, the report goes on to say, a major overhaul of the Directive was agreed, and the General Data Protection Regulation 2016/679/EU (GDPR) will replace the Directive from 25 May 2018. Under the GDPR, it says, EU citizens' personal data may only be transferred to a third country if very stringent rules are applied and the Commission has decided that it will ensure an adequate level of protection.

However, there are two sets of EU legislation, the other being Directive (EU) 2016/680. As it stands, the UK has not transposed the Directive and, in the turmoil surrounding Brexit, there are no firm indications that it will.

There must be questions, therefore, as to whether the UK's existing domestic data protection regime will be considered "adequate" by the Commission, or whether it will even have the resource or the political will to make a rapid determination. Left on the back burner, several years after Brexit could elapse before the UK was judged compliant, if at all.

In the interim, this would mean that the UK would not be allowed access to EU databases which held personal data on "EU citizens", which would include customs systems. Without full and active cooperation, on the basis of a negotiated deal on joint customs operations, the UK could be forced to revert to paper-based systems for customs clearance.

Given the implications of this, doubtless the Article 50 negotiations will be focused on crafting an early, and comprehensive agreement. But if we walk away with no deal, then talk of "serious consequences" becomes a grotesque understatement. Be under no illusions, the effects would be catastrophic.

For good reason, therefore, Barnier declares that "this scenario of a non-agreement, a no deal , is not ours". He tells us: "We want an agreement. We want to succeed. Success not against the British, but with them". On behalf of the 27 and with the whole team around me, has says that "we want to reach an agreement on an orderly withdrawal from the United Kingdom and to prepare the way for a new partnership".

That said, Barnier is then setting his own "conditions of this success", at the heart of which is an uncompromising demand that the UK honours its financial commitments to the EU. "When a country leaves the Union, there is no punishment", he says. "There is no price to pay to leave. But we must settle the accounts".

Given the rhetoric from Mrs May and her ministers, to say nothing of the statements from the "Ultras", this is shaping up to be the rock on which any possibility of an agreement founders.

One hardly even needs to read between the lines to see this, as Barnier also declares as a condition for success the need "to do things in order and put them into perspective".

"The challenge", he says, "is to build a new relationship between the EU and the UK on a solid foundation". He adds: "This implies putting things in order: first, finding an agreement on the principles of an orderly withdrawal from the United Kingdom, and then discussing, with confidence, our future relationship".

As clear as he can be, Barnier is saying that the money question must be settled first, without which settlement there can be no discussion on the future relationship.

Taking an entirely pragmatic view, the potential cost of a "no deal" catastrophe is potentially so huge – amounting to hundreds of billions – that any amount the "colleagues" may demand is by comparison modest. We should pay up and be done with it.

"Team Brexit", though, seems trapped by its own rhetoric and, having convinced itself that the "WTO Option" is tenable, lacks that all-important sense of peril that will dissuade it from taking a leap over the edge of the cliff.

Against that, they will find Barnier deciding to "be firm, without being naïve". He is going to "put things in order and put them into perspective" and only then will we "be able to engage on a solid basis the discussion of our future relationship".

This is a more than adequate sign of how difficult the talks are going to be. Mrs May clearly doesn't have the measure of them, and the "Ultras" are away with the fayries. And if they got a dose of reality from the EU's soon-to-be chief negotiator, they show no signs of understanding what they've been told.

Richard North 23/03/2017 link

Brexit: Formula One on the brink?

Wednesday 22 March 2017  

This weekend coming, days before Mrs May drops her bombshell on Brussels, there is an event of far more importance to many of the estimated 420 million fans who will follow it – the 2017 Australian Grand Prix.

This will kick off the 68th Formula One World Championship, a motor racing championship for Formula One cars which is recognized by the sport's governing body, the FIA, as the highest class of competition for open-wheel racing cars.

Ten teams are scheduled to compete in twenty Grands Prix - starting in Australia on 26 March and ending in Abu Dhabi on 26 November – spending between them just short of $3 billion.

And although it is an international sport, with the organising company valued at around $8 billion, all the teams are based in Europe (or have forward bases on the continent) and – making it something of a success story of the UK - seven have bases in England. Between 2005 and 2015 every single world champion (bar one) drove a car which was designed, engineered and built in Britain.

The teams themselves employ hundreds of skilled workers and indirectly employ thousands more in an estimated 4,500 related businesses, creating high value engineering and technology spin-offs, with many applications.

They support a cluster of high-performance engineering firms concentrated in an area of the Midlands and outer south east - nicknamed "Motorsport Valley"'. These have enjoyed sustained growth since 2009 and achieved an all-time high annual turnover of £9 billion in 2012, employing 41,000 people in the supply of world-class engineering products and motorsport services.

In March 2019, just before the UK leaves the EU, one assumes that the Australian Grand Prix may just have bee completed, and 70th season will be under way. But whether the majority of the teams will still be based in England is anyone's guess. Possibly, it will be so destabilised by Brexit that the teams will be forced to move out of the UK in order to stay within the EU.

That's the thing about Brexit. In evaluating its impact, it's easy to make generalisations and draw from them conclusions which seem to have merit. But this is about the EU, and the EU is about detail.

In terms of industry and commerce, some sectors may do well out of Brexit and others may be permanently damaged. But that's a generalisation. Some businesses within damaged sectors may survive and even prosper. Some businesses will suffer, even though their sectors will escape largely unscathed.

For other sectors and businesses, there's no way of knowing. There are too many imponderables. They may do well. They may struggle. They may collapse. It all depends on what happens during the negotiations.

As regards Formula One racing, it takes little imagination to pinpoint the areas of vulnerability, identified in this article. It describes "a week from hell" in the 2016 season, as the logistic teams faced the "back-to-back" schedule of Austrian Grand Prix followed by British Grand Prix.

These back-to-backs are nothing new in Formula One, we are told, but this one was described as a "killer" because of the distance involved, almost 1,000 miles, and the very fine margins on time as a result. Any delays crossing the Channel, it was feared, could have had a knock-on effect on the British Grand Prix.

The logistics of the business are quite remarkable, involving a fleet of six Boeing 747 freighters, with a total load capacity of 720 metric tons operated by logistic partners DHL for the long-distance "fly-aways". They are backed up by 35 containers sent by sea months in advance with the heavy and bulky items.

For the European venues, though, the trucks take over, each team operating its own liveried fleet. And in the most challenging transfer, from Austria to the UK venue in Silverstone, there is no margin for error for the 300 or so HGVs, which make up the F1 convoy, heading for Calais and the Channel ferry crossing.

In the narrative describing the transfer, concern is expressed about delays at Calais. These has been experienced through the migrant crisis, with every hour lost felt at the other end. There are no contingencies in the even of French unions striking, which has happened a lot recently with air traffic control and railways in the country, nor for French customs to introduce any delays to the system.

Last year, Formula One was collectively holding its breath for the trucks appear safely on the other side of the Channel in time for the Silverstone build to begin. That time, they were lucky.

In 2019, however, there will be another complication – the UK will no longer be in the Single Market. Irrespective of what deal we manage to bring home from Brussels, there will be border controls at the ports, with customs and other checks. There will doubtless be delays, which will put the tightly organised - and highly fragile - timetables at risk.

Additionally, because free movement of goods will no longer apply, the UK-based teams will no longer be able to move their vehicles and equipment freely across the Channel. For customs purposes, they will be treated as temporary imports, for which special rules apply.

Fortunately, there is an international system for dealing with such contingencies, implementing the Istanbul Convention on Temporary Admission via the World Customs Organisation. This is the ATA Carnet system, for the equipment, and the CPD Carnet for the vehicles. These allow for the temporary import into the EU – and to other countries in which Formula One events are held. However, they add costs to the system and, of more concern, time.

The European circuits are under much greater time pressure than the "fly-aways", with their "back-to-back " events, and much more equipment is moved, including the prestigious team " motorhomes ", each requiring eight or more trucks to move them.

Each Formula 1 team transports roughly 50-60 tons of equipment per race. The teams are completely self-sufficient – they bring their own water bottles, refrigerators, cabling and even their own power generators and their food supplies in refrigerated vehicles.

For an ATA Carnet, every item must be listed on the official form and, while a single carnet is valid for a year, once completed, they cannot be changed. But loads vary so much between races that new applications are often needed every time convoys take to the road. And, there's the rub. While loading goes on almost to the minute of departure – not a problem in the Single Market – applications for Carnets must be lodged 2-3 days before travel.

Nor does the Carnet remove the need for customs formalities set out in the Commission Implementation Regulation. These include documentation checks and verification inspections, to ensure than all equipment is listed, and checks when they leave the country to make sure they carnet-holders take out everything they brought in. Such checks cannot avoid adding delays to the transport process which, currently, enjoys free movement without customs control.

Once the material has been allowed to enter under the temporary admission procedures, bizarre "red tape" provisions apply. For instance, once imported it must be re-exported within a variable time frame (down to three months in some circumstances). That is not a problem for Formula One, running events lasting only days, except that nothing imported can be disposed of locally, without giving five day's notice and getting written permission.

Then, specifically, import of "consumables" is not permitted under the carnet system, while imports under the normal import system would require most foodstuffs to be routed via a Border Inspection Post. This effectively means that the lavish hospitality services supplied at EU venues, including the provision of gourmet meals for VIPs, can no longer be serviced from a UK base after Brexit.

The point at which the cumulative loss of flexibility makes it more attractive, and even necessary, to move operations away from the UK will obviously be influenced by commercial factors, but if there are added complications, such as requiring visas and work permits for skilled personnel, tariffs on imported components, and onerous rules of origin, the balance of advantage will shift.

In a highly competitive and extremely mobile industry, French, Italian, German and Spanish enterprises would be keen to take the business. And with the whole of Formula One built on mobility, it could pack its bags and be gone in a weekend.

The killer is likely to be customs delays – at their greatest if the UK opts for the "no deal" scenario and decides to work exclusively under WTO rules. Yet, despite this, we see the build-up of an insidious campaign to convince the public that this option would be acceptable. The idea of us working to "WTO rules" is becoming locked into Whitehall as an unswerving mantra, driving out sentient thought.

Rarely, if ever, are the full consequences fully spelt out – and we see Tory MPs such as Marcus Fysh clearly demonstrate that they have no idea what is involved. Yet thinking has never been their strong suit - theirs is the churn out the mantra. 

Formula One, though, is clearly vulnerable and on several counts. Mobility is the lifeblood of an industry which is dedicated to speed. Any loss of mobility or flexibility in operations would be terminal. And as the backbone of a £9 billion UK industry, its relocation could cost us dear. And it is only one of many industries at risk to the ideologues who form the "Ultra" tendency in Brexit politics.

Even with a comprehensive free trade agreement – if it is actually possible to conclude one in the time – we are going to find trading with our EU former partners much more difficult. With the WTO option, it will be inestimably more difficult – little short of economic suicide. These people would have us leaping over the cliff-edge with a song on our lips, singing their praises as our bodies thud onto the rocks below. 

Those who promote this course of action are going to have a lot of explaining to do when high value jobs and industries up-anchor and move out. The billions will soon add up and, collectively, under the aegis of the WTO option, they will spell out not a recession but a full-blown depression.

And that, as they say in the business, is a racing certainty.

Richard North 22/03/2017 link

Brexit: an unknown destination

Tuesday 21 March 2017  

The one good thing about Mrs May finally letting it be known when she is to invoke Article 50 is that it puts to bed all those who advanced at great and tiresome lengths the view that we did not need the Article and could proceed immediately to the leaving stage by repealing the European Communities Act.

This goes back to July 2012 when Booker was calling for Mr Cameron to pursue Article 50, only to run into a storm of hostile commentary – not dissimilar to what he's currently getting.

Pitched into battle we saw the likes of Idris Francis and Ashley Mote lambasting Booker, calling Article 50 a "trap" and warning of dire consequences if it was ever invoked.

Some readers had the Eurogendarmerie storming the British Isles while Torquil Erikson told us that "any and every EU regulation and directive which has been passed into UK law would be nit-picked over and reinforced with threats of fines and prosecution".

"Any interim activity planned by the British government", he said, "would be examined microscopically for any apparent unlawful activity, and again policed with threats. It would be a logistical and administrative nightmare for the then UK government".

At the top of the dung heap was Gerard Batten, speaking for Ukip, then as now, arguing that Article 50 should not be used.

We can take some small comfort from the fact that these voices will no longer be heard, but there will be no apologies offers or admission of error. That never happens in eurosceptic land. Different voices take up different themes and the noise continues.

From the Prime Minister, however, rather than noise, we get clichés. "I am very clear", she says, "that I want to ensure we get the best possible deal for the United Kingdom that works for everyone across the United Kingdom and all parts of the UK when we enter these negotiation".

"I have set out my objectives", she declares: "These include getting a good free trade deal. They include putting issues like continuing working together on issues like security at the core of what we are doing. We are going to be out there, negotiating hard, delivering on what the British people voted for".

What we don't get is any sense of how she intends to achieve this, up against Commission President, Jean-Claude Juncker, who has a message for us. "Britain's example", he says, "will make everyone else realise that it's not worth leaving".

This has the tabloid media spitting with indignation at Juncker's "boast", but a more sanguine assessment might be that the President, unlike the Prime Minister, has weighed up the odds of the UK walking away with a successful deal, and has concluded that they are not favourable.

If we are to believe the odious Guido the "Ultras" themselves are not rating our chances very highly, while a "government source" puts the likelihood of the UK having to adopt the WTO option at 50-50.

If that is the case, the Government ministers have no-one to blame but themselves. It would take very little skill and even less research to cut through the rhetoric and acknowledge that concluding a "good free trade deal" inside the 18 months being set aside for the talks - on top of all the other issues that have to be settled – is extremely unlikely.

All one can do is watch the Government define its own nemesis as it lurches forward into an impossible position from which there is no escape.

Sadly, though, it appears we are going to be none the wiser in just over a week when the Prime Minister sends her Article 50 notification to Brussels. We are told to expect (contrary to the advice of Ivan Rogers) only a short letter, possibly extending to two pages at most, doing nothing more than reiterating the Government's general objectives.

If that is the case, it will be a mistake, handing the initiative to the "colleagues", who will then have no constraints in crafting their response. And if, as expected, the they couch it as a series of demands, leading with the presentation of a substantial claim for financial compensation, then we can pretty much assume that we're in for a rough ride.

Mrs May has seriously dropped the ball on this, having failed to manage public expectations in a battle she cannot win. Come what may, the UK is going to have to pay a substantial sum to the EU, and make ongoing financial commitments, if it is to stay in the game. Yet, she has allowed the assumption that she will be standing firm, setting herself up for a fall.

Some theorise that, in the expectation of failure, Mrs May is looking more to the process of blame deflection than she is a successful outcome to the negotiations, in which case an unwavering stance from the "colleagues" will play into her hands, allowing the "unreasonable" EU to be cast a the villain.

Juncker is already halfway there, according to (Bild am Sonntag via Reuters), having said that Juncker said Britain would need to get used to being treated as a non-member. "Half memberships and cherry-picking aren't possible", he says: "In Europe you eat what's on the table or you don't sit at the table".

That latter phrase is being taken as an indication that the EU will be immovable on the financial issue, in which case we are already heading for the WTO option and economic catastrophe.

Would-be chief negotiator Michael Barnier certainly seems to be preparing for the worst, instructing the EU-27 that they have to start preparing now for future customs controls.

To extent to which Mrs May's "Team Brexit" is prepared for this is going to be the acid test. The precursor to many a free trade deal – as in 1997 with the EU and the Republic of Korea – is a customs agreement. It thus stands to reason that this issue will be high up on the work programme. How it is presented and the progress made may give us a strong clue as to how the technical negotiations will proceed.

As it stands, though, on 29 March 2019, we look to be leaving the EU – in good time for the Euro-elections, thus making sure that the current crop of UK MEPs is the last. In one fell swoop, Ukip loses most of its power base.

Such things, though, are mere trivia compared to the momentous events afoot. The phoney war is nearly over and we are about to enter a new phase. No one knows exactly how this is going to pan out, as we are navigating uncharted waters. But, at least, we will shortly be able to count down to our unknown destination.

Richard North 21/03/2017 link

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