Brexit: mixed fortunes for May

Sunday 24 July 2016  

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Richard North 24/07/2016 link

Brexit: getting to grips with the issues

Saturday 23 July 2016  

In yet another Select Committee Report., this one from the House of Lords European Union Select Committee, the theme is one of scrutinising Brexit, with their Lordships taking a look at the role of Parliament.

"Withdrawal from the EU", they say, "is arguably the most complex, demanding and important administrative and diplomatic task that the Government has undertaken since the Second World War", then pointing out that, to keep an eye on it, Select Committees "will need additional resources that are proportionate to the scale of the challenge".

At last, it seems, we are beginning to get some recognition of the nature of the task confronting us, but to deal with it, we will need a lot more than just additional resources. The whole select committee structure needs to be revised, and the committees need to work in completely different ways.

Some long time ago, I was at the sharp end of a Congressional Inquiry (the US equivalent of a Select Committee) – and what a different beast that was. They sent staff all the way from Washington to London to interview witnesses, and I spent a very intense half-day being interviewed by a group of them.

What struck me was that the US Committees are far more generously endowed with their own research staff, who carry out their own investigations, drawing up detailed dossiers which fuel their own Committee inquires. And in the range of material they look at, and the witnesses consulted, they are far less prestige-driven than their Westminster equivalents.

That, it seems to me, is what must change here. Committees must be staffed with capable researchers who are able to pursue their own lines of inquiry and do genuine research of their own. They should not have to rely on a succession of opinionated witnesses to tell them what to think. And there should not be this almost total reliance of oral evidence. The Committees should be able to commission their own research.

As to the oral sessions, these facile games of packing the benches with four or five witnesses, and exposing them to random questions for a few hours from ill-prepared MPs, simply isn't good enough. Parliament should hire professional examiners acting in the manner of courtroom lawyers, and do the job properly.

In my time, I've been an expert witness in some really serious cases, including a fatal accident inquiry when I spent three days in the box, questioned by a team of top-class QCs. If you are going to get value out of witnesses, that is what it takes.

On the other side of the fence, I've represented clients in tribunals, where lay advocates have been allowed. Preparing the schedule of questions can take days of work, for just one witness. And a lot of the process is introducing written evidence, plans, photographs, etc., and asking witnesses to comment on them.

On one on my shelves in my office, I still have case dossiers containing over 7,000 scientific papers that I was expected to have read, once they had been introduced into evidence – then to lead the court through the contents and explain their significance. From start to finish, that exceptional case took nearly a year. And yes, I read every damn paper.

The thing is, when we are dealing with something as important as a complete revolution in the way we are governed, with the health and wealth of the entire nation dependent on it, that is the sort of detail we should be looking at. To have a amateurs casually interviewing a few high prestige witnesses, simply to confirm the prejudices of the questioners, is a complete waste of time and effort.

Of course, we are so good at having prolonged inquiries after the event – the BSE inquiry, the Bloody Sunday inquiry, Leveson and, more recently, the Chilcot inquiry. At a cost of hundreds of millions, it seems no expense is spared in our attempts to find out why things went wrong. Why then should we not invest a little of that money up-front, in attempt to make sure that we do things right? 

And, if Parliament can't hack it, it should move over and cede the ground to people who can do the job. We used quite frequently to have Royal Commissions to examine issues of substance, and their weighty reports used to fuel debates for years thereafter. If ever there was an example of a need for such a Commission, the post-exit reconstruction of Britain is one.

As it is, one cannot escape the impression that officials are flying blind and, outrageously to mix metaphors, are totally out of their depth.

This comes over from an article in the Guardian which tells us that UK officials have been trying to reach an outline agreement with European leaders on the sequence of Brexit talks, "including a discussion about whether the terms of Britain leaving the EU can be negotiated at the same time as talks about the future trade relationship".

On this basis, we are told that Theresa May and her Brexit departments in Whitehall "do not want to concede any ground on triggering Article 50 until this can be clarified". The sequence question, according to the newspaper, "is an essential in the opening phase in the tactical battle, with the UK being in a weaker position if the negotiations are rigidly organised".

This is a classic example of where our politicians should be better briefed, with an outline of the potential decision-trees set out before we get bogged down in such detail. If, for instance, we decide to go down the Efta/EEA route, then sequencing is wholly different from the free trade agreement option, carried on alongside the Article 50 settlement negotiations.

In the former event, there will in any case be a tripartite negotiation, one with Efta, the next with the EEA Joint Committee and the third with the European Commission's designated negotiating team – each covering very different areas. On top of this, we will need to be talking to global trading partners about treaty continuity.

The essence, therefore, is to define the big picture first - les grandes lignes. This is actually where the Select Committees could perhaps do a good job. These are essentially political questions. But to look at the performance of the Committees so far, we're going to have to wait an awful long time before we come up with anything usable.

So far, most of the discussion seems to be centred on issues which should have been settled years ago, with commentators rehearsing arguments at a terrifyingly superficial level. But with all those salaries and expenses paid – to say nothing of the cost of the offices – it is about time we got some value for money.

Our Parliament is going to have to re-learn its job. And it's going to have to do it very quickly. MPs in particular need to get out of the nursery and get stuck in to the jobs they are paid to do.

Richard North 23/07/2016 link

Brexit: May soothes the Franco-German motor

Friday 22 July 2016  

If she is going to get anywhere at all in European politics, then the first thing she has to do is make her obeisance to the Franco-German motor. And that is precisely what Theresa May has done, visiting first Angela Merkel and then, last night, François Hollande.

The symbolism has not escaped the attention of the German media, which has been quick to note that, unlike her predecessors, Mrs May has chosen not the United States to visit first, but Germany.

What we can draw from the separate meetings is extremely limited. Both continental politicians are facing re-election next year and will be more concerned with their domestic audiences than UK sentiment. And at least one of them will probably not survive the electoral process.

However, Merkel seems to have offered Mrs May some breathing space, agreeing that the new Prime Minister should not trigger Article 50 until the New Year. Merkel is happy to give the new government time and will then respond in a "constructive" manner in "a spirit of solidarity". She told reporters that Britain needed a "well-defined position" before starting the talks.

Whether this spirit of goodwill is entirely shared by President Hollande remains to be seen. Before meeting Mrs May yesterday evening, he was in the Republic of Ireland talking to Taoiseach Enda Kenny, with Brexit and terrorism on the agenda.

Both men expressed concerns about any undue delay in the UK starting Brexit negotiations, with Hollande declaring that they should not drag on. "The sooner the negotiations are opened the better, and the shorter the better", he said.

In the evening, after yesterday's meeting with Mrs May, however, he was more specific, agreeing that there needed to be "preparations" for the negotiations. The led the Financial Times to speculate that he was relaxing his stance.

Nonetheless, Hollande repeated that it was in "the common interest" that the talks should be "sooner the better", warning that there could be "no discussions, no pre-negotiation before the negotiation". On the plus side, the French President agreed that the Le Touquet agreement on border controls would stay in place.

Less helpfully, Hollande warned that if the UK chooses to limit free movement of persons, it will see trade restrictions introduced. At a press conference after the meeting, he talked of this being "the most crucial point". "Britain will have to choose: stay in the single market and accept free movement or have another status", he said.

This was earlier reinforced by Pascal Lamy, former WTO head, who said that it was "pie in the sky" to expect free trade with Europe while curbing EU migration.

Interestingly, and perhaps significantly, the day previously, Merkel had refused to be drawn on the issue, saying it would "cause too much uncertainty" if leaders commented on possible negotiating scenarios. Nevertheless, according to Frankfurer Allgemeine Zietung, Mrs May stated that freedom of movement: "will be part of our discussions".

May said her priority was a "sensible and orderly departure", even though that would "not please everyone", although she is not offering any clues as to her vision for a post-exit settlement. Before leaving for Berlin, though, she was confronted at PMQs by Sir Edward Leigh, who asked is she was "prepared to reject staying in the single regulated market and to offer instead to our friends in Europe a free trade deal".

All he got for his efforts was a non-committal Mrs May, telling him that "we need to ensure that we listen to what people have said about the need for controls on free movement, and that we also negotiate the right and best deal for trade in goods and services for the British people".

Leigh's intervention was indicative of a rich vein of sentiment amongst backbench Tory "eurosceptics", whose tenuous grip on reality keeps them firmly anchored in 80's free-trade doctrine, where "deregulation" is almost a religion and ending free movement has become an article of faith.

The extreme end of this sentiment can be seen in this month's Eurofacts which has an insane piece from Michael Shrimpton on its front page. It has him writing that "a failure to denounce the EEA Agreement would be a gross betrayal of the electorate, and constitutionally improper".

That we are getting this sort of thing from Shrimpton is no surprise, but the fact that it gets front-page treatment on Eurofacts reminds us of a (hopefully) dwindling corps on the leaver "community" who are to Brexit what flat-earthers are to geography. Short of pulling the plug on the ECA tomorrow, there will be no pleasing this sect.

For different reasons, we can no more trust what Hollande has to say. Booed in the aftermath of the Nice atrocity, and with Marine Le Pen breathing down his neck, his statements are conditioned by his domestic audience and his need to hold on to the reins of power. Looking too friendly with a British leader is not good for his ratings.

Neither can anything be taken from the diplomatic pleasantries between Merkel and May. The German press is quick to remind us that Dr Merkel has a habit of being nice to visiting politicians, only later going on to eviscerate them. But then, she doesn't eviscerate everybody she meets.

Pleasantries of the kind reported are common, the Germans tell us. But one can assume that both were serious. May wants to take the UK out of the EU without triggering a recession or consigning us to political isolation. Merkel wants to prevent Brexit plunging the euro zone into a new crisis or splitting the European political community asunder.

To that extent, Merkel and May share the same interests and, if Merkel survives next year's election, there should be a meeting of minds. But, with Hollande almost certainly for the chop, there will be a whole new set of political relationships to forge before we can get down to the nitty-gritty of the Article 50 negotiations.

At some time, however, it may dawn on the UK government that the key bodies in the early phase are the EEA institutions, the Council and the Joint Committee, releasing us in the early phases from the tyranny of the Article 50 timetable. But, for us to benefit from this release, serious policy decisions are going to have to be made by Mrs May.

As it stands, there is little point in looking to David Davis for inspiration. "Mr Brexit" did not accompany Mrs May to either of the capitals, and the egregious Mr Johnson was also noticeable by his absence. This could suggest that Mrs May intends to take a hands-on approach to the negotiations, leaving her ministers the minor role of attending to the administrative details.

The Irish Times has a different "take" on this, suggesting that the "three Brexiteers" are to become the "fall guys", when Brexit doesn't deliver the eurosceptic fantasies.

While May will make Brexit happen, writes Noel Whelan, she and her government will inevitably be accused of a selling-out on some aspects of it. She has decided that Boris and the other Brexiteers should be beside her in the tent taking the flack for those compromises and having to explain the extent to which they may have oversold the benefits of leaving.

As for the present, May's direct intervention already seems to be yielding dividends. Confronted with the problem of the two-year initial limit on the Article 50 talks, German officials are conceding that the timescale is far too short.

To deal with this, officials are spelling out two possible scenarios. Under the first, the EU would revise its position and agree to a prolonged period of negotiations before Article 50 is invoked. That would win both sides extra time before the clock starts ticking.

Under the second option, May would trigger Article 50 early next year but would be for Britain to settle for a very basic framework for its future ties with the EU, based on an existing model. Enter the first phase of Flexcit ... they get there eventually.

As regards extending the time before the talks start, this was precisely the option I put to the Treasury Committee, something I first suggested at the end of June.

My suggestion had MP Stephen Hammond, and Treasury Committee member, airily summoning up "the world of realpolitik", arguing that this would be "unlikely", thus reinforcing the view that Mrs May is going to have to look outside Westminster for her advice.

But, in first attending to the Franco-German motor, Mrs May has at least got her priorities right.

Richard North 22/07/2016 link

Brexit: a failure to plan

Thursday 21 July 2016  

The Foreign Affairs Select Committee has just published its latest report, this one entitled: "Equipping the Government for Brexit".

As to its substantive findings is what is a mere 18-page report, it agrees with the recent report of the Joint Committee on the National Security Strategy which concluded that the Government's failure to engage in comprehensive planning for a potential Brexit before the referendum "indicated the prioritisation of political interests above national security".

The previous Government's considered view not to instruct key Departments including the FCO to plan for the possibility that the electorate would vote to leave the EU, says the Committee, "amounted to gross negligence".

It has, in the Committee's view, exacerbated post-referendum uncertainty both within the UK and amongst key international partners, and made the task now facing the new Government substantially more difficult. It then concludes that the lack of contingency planning inevitably means that the Government's plans are tentative and just emerging.

Out side the remit of the Committee, though, is the same failure of the official leave campaign "to engage in comprehensive planning for a potential Brexit". That, in my view, was equally negligent.

Some argue that the campaign was not a political party preparing for government, and therefore did not need to offer a "manifesto". But just the events of the last few weeks should serve to demolish that notion.

The very fact that the Government has failed to plan, and the former "leave" campaign is unable to step in with its own plan means that there is a dangerous and extended political vacuum, creating unnecessary uncertainty and opening the way for rushed, and ill-considered plans to take root.

The media's short-sighted refusal to acknowledge Flexcit hasn't helped – despite over 100,000 downloads, but you get a sense of what we're up against when Charles Moore plugs the sad little offering by Martin Howe, published yesterday, yet completely ignores the copy of Flexcit sent to him some months ago.

Mind you, the media has almost completely ignored Howe's efforts as well, signifying a general lack of interest in anything that is not redolent of "biff-bam" personality politics, and its inability to address issues of even the slightest complexity.

But the fact remains that, if the official leave campaign had supported Flexcit, when it was offered to Dominic Cummings in June last year, or had Arron Banks supported it – as he said he would – then we would have made a great deal more progress than we have. The debate would have been much more advanced.

As best, the failure to support a coherent plan has cost us months of delay – and some very great expense. At worst, the uncertainty and confusion might so damage the Brexit process as to cause it to fail.

That this is even a possibility speaks to the reckless lack of vision of the official leave campaign. The case for producing an exit plan always was sound, which is why we devoted such energy (and expense) into producing it. There was never any sound case for rejecting it.

There is even less of a case for continuing to reject it.

Richard North 21/07/2016 link

Brexit: unlimited dishonesty

Wednesday 20 July 2016  

A much-repeated tweet from Wolfgang Munchau has him complaining that the remain camp not only lost the referendum. "They are, he says, now losing the post-Brexit debate too".

The greatest irony of this is the suggestion that there is any kind of debate going on at all. What we mostly see are hermetically sealed groups, constantly repeating their entrenched positions without variation or deviation – entirely oblivious to the arguments of the competing factions.

As far as I can see, none of them read each other's work (or acknowledge that they have), and from their lofty heights the only thing they have in common is a sneery disdain for outsiders such as, the only sources from which new ideas and information are coming.

In his own article, Munchau thus cites one of his own group, John Springford, who writes a thoroughly dishonest piece under the label of the Centre for European Reform, purporting to inform us of the limited nature of Britain's exit options.

Springford's dishonesty is a classic of its kind. He relies on a mixture of half-truths and disinformation to build a straw man argument, which he then proceeds to demolish in a quite transparent attempt to control the agenda. But it is not a debate – it is simply a series of assertions which Springford wants you to believe, in lieu of the truth.

Interestingly, the main aim is an attempt to convince us that it is not possible to negotiate an exit deal with the EU which keeps us in the Single Market while allowing us to imposing quotas on the number of immigrants from the EU.

To make the case, Springford chooses to contrast two of the three Efta State members of the EEA, Liechtenstein and Norway, while ignoring Iceland. Norway and Liechtenstein, we are told, are full members of the single market, signing up to all rules and standards in goods, services and capital, as they are members of the European Economic Area (EEA). But, it is conceded, "they have different rules governing the free movement of workers".

And it is at this point that the lies, half-truths and deception start. Springford would have it that: "The EEA agreement allows Norway and Liechtenstein to restrict the flows of people if 'serious economic, societal or environmental difficulties of a sectoral or regional nature arise'".

But, in fact, that's not what the EEA Agreement says. The relevant part, Article 112, actually states:
If serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising, a Contracting Party may unilaterally take appropriate measures under the conditions and procedures laid down in Article 113.
Three issues arise from this. Firstly, the provision applies to all contracting parties, not just Norway and Liechtenstein. Secondly, the scope is far wider than just the movement of people and, thirdly, the application is unilateral. The party taking action does not require the permission of the other parties.

The relevance of Article 112 applying to all contracting parties immediately becomes apparent when we see Springford claiming that "Norway has never used this 'safeguard clause'". That much is true. But the missing country, Iceland, has used the safeguard clause – twice – albeit not in respect of the free movement of persons. And one should also note that the European Commission has used the safeguard measures against Norway, to restrict the flow of farmed salmon.

Furthermore, when the EEA Agreement was first signed, two other signatories, Austria and Switzerland also invoked Article 112, the latter also in respect of free movement of persons. Crucially, once it is realised that safeguard measures are of general application and can be invoked unilaterally, the perspective changes somewhat. But this, Springford doesn't want to happen.

Instead, in Springford's little world, we move on to the lie direct. The reason, he claims, is that Norway didn't invoke safeguard measures is because "under the agreement, the EU may retaliate by restricting imports of goods or services from Norway".

And that really is a lie, at several levels. Firstly, we have to look at the Agreement – in this case Article 114 – which states:
If a safeguard measure taken by a Contracting Party creates an imbalance between the rights and obligations under this Agreement, any other Contracting Party may towards that Contracting Party take such proportionate rebalancing measures as are strictly necessary to remedy the imbalance. Priority shall be given to such measures as will least disturb the functioning of the EEA.
Even a lay interpretation will suffice here to tell the reader that "retaliation" is not an appropriate word. We are looking at "proportionate rebalancing measures", which would be of a limited extent and confined to like measure in respect of the free movement of persons. Such measures could not extend to the movement of goods and services.

The second lie is that Norway never intended to invoke Article 112 in respect of free movement of persons. This country's bigger problem is not immigration but under-population. Half as big again as the entire United Kingdom, it has a population of less than one-twelfth. And, as regards immigration, the major movements come from outside the EU, driven by the country's generous and liberal asylum policy.

Nevertheless, one can see how Springford is building the lies, as he then goes on to claim that: "Liechtenstein has been allowed to restrict free movement since 1998 by imposing quotas on the number of EEA nationals who could live and work in the country".

The key word here is "allowed" – in that, resides another lie. Liechtenstein unilaterally invoked Article 112. It wasn't "allowed" to invoke it. It invoked it as of right, calling in a treaty provision which had been agreed and ratified by all parties.

But then comes the lie indirect – the lie by omission. To understand the story properly, and to put it fully into context, one needs to know that Liechtenstein only briefly invoked the Article – in order then to broker amendments to the EEA Agreement which gave it a permanent solution (taking it outside the ambit of Article 112).

Furthermore, we must factor in Switzerland with its eight million population which, in signing up to the EEA Agreement in 1992, came under the same Protocol 15 which exempted Liechtenstein from the free movement of persons. Had Switzerland remained in the EEA, doubtless it too would be exempt from the full free movement of persons provisions.

Knowing this as we do, the next Springford lie has the transparency of the water in a summer Norwegian fjord. Says our man, the EU "tolerated" the Liechtenstein deal because "it is politically and economically insignificant, and its curbs on free movement do not threaten the integrity of the EU".

That is the lie Springford wants to sell you – one which the establishment is only too keen to perpetrate. Mostly likely, the Treasury Select Committee will buy it, relying on the ignorance of Monnet Professor Dougan, rather than my better researched paper, which they will either not publish or will hide away.

Just to be on the safe side, though, Wolfgang Munchau picks up the lie and runs with it, embellishing it on the way. Liechtenstein becomes a "a tiny city-state" (which it isn't), the outcome becomes "a cherry-picking deal" (which it isn't) and he calls it "an emergency brake on immigration" (which it isn't).

This is the way the game is played. We are fed a diet of lies and half-truths and then what passes for a debate is rigged, so that important information is kept from the people. Sources of alternative information are sneered at, denigrated or simply ignored. The truth will not out. The lies must prevail.

Richard North 20/07/2016 link

Brexit: in for the long haul

Wednesday 20 July 2016  

As the legal challenge on Article 50 went to the High Court yesterday, counsel for the Government, Jason Coppel QC, told the Court that there was no intention of invoking the Article until next year.

This largely procedural statement thus allowed the Courts some flexibility in scheduling the full hearing, which will now go ahead in October. It does not bind the Government but, if there is a change from that position, Coppel has undertaken that the Court would be given advance notice.

The crux of the case, coordinated by law firm Mishcon de Reya is that Article 50 cannot be invoked without the express permission of Parliament, despite the Government view that invoking the Article is covered by Crown prerogative.

When it comes to the details, there are good arguments countering the Mishcon de Reya case, which doubtless will be heard at length in October – sufficient to justify the generous fees to m'learned friends.

If I was to hazard a guess as to the outcome, however, I would say that their Lordships will find that this is a political matter between the Government (the executive) and Parliament. Parliament is free to use its own powers to bring the executive to check, if it so wishes and, in this event, traditionally, the Courts have been reluctant to intervene.

If Article 50 is to be invoked next year, though, this brings us into the French presidential elections of April-May and the German federal election, the latest date for which is 22 October 2017. It remains to be seen whether either or both Hollande and Merkel will be re-elected but it stands to reason that they will not be fully engaged on Brexit until the elections are over.

But the more substantial point arises in terms of the "common position" which the European Council must agree in order to instruct the Commission on its negotiating mandate. When two of key players may change mid-term, it is difficult to accept that any firm progress can be made until the end of 2017, when the new German federal government has bedded in.

Theoretically, that will leave us with only just over a year to conclude negotiations – or apply for extra time. But it cannot be in the UK's best interests to cram the talks into such a short period, or run them to the wire in the expectation that the EU will agree to extra time without demanding unwelcome concessions.

This is especially the case when we hear further confirmation that the Government has not prepared an exit plan – this time from New Zealand Prime Minister John Key.

Key says he was "quite shocked" to find during his recent trip to the UK and Europe that there is no plan for what Brexit is going to look like. "The most significant takeaway message", he said, "is no one has a clue what it's going to look like", adding: "We were quite shocked, we really thought when we got up there that there would be this plan that we had just missed in the New Zealand media - there is no plan".

Mr Key went on to say that the UK government hasn't done any work on what Brexit will involve and officials were in fact stopped from doing such work.

With the new department of state for exiting the European Union now in the process of being set up, one can only hope that civil servants are trawling through the structures of our relationship with the European Union and the Member States to draw up a basic list of the heads of discussion.

Aside from the trade relationship with the EU, which must be established, there are the "high politics" questions of foreign policy and defence cooperation - as well as justice and home affairs - and then the matter of continued UK participation in EU programmes and agencies.

As I pointed out in my select committee testimony, Brexit has to deal with much more than just trade, an observation which led Pete recently to look at some the EU agencies we will want to continue working with.

One of those, based in London, is the European Medicines Agency (EMA). It began operating in 1995 and is currently responsible for the evaluation, supervision and safety monitoring of medicines developed by pharmaceutical companies for use in the EU.

The UK leaving the EU raises questions as to whether the Agency can continue to be based in London. Even staying in the EEA puts its future in doubt. Efta State EEA members can participate in EU agencies, but they have no voting rights and only limited management rights.

To have such a prestigious EU agency located on the territory of a non-EU member might be difficult to justify, while the prospect of the UK losing voting and management rights would be a huge blow to the UK pharmaceutical industry.

There is a similar problem with the European Defence Agency (EDA), which manages the A400M project, the strategic airlifter which is vital to the RAF's future capabilities. That we would have no voting or management rights in an agency handling this multi-billion pound project would be intolerable.

As of this year, Efta/EEA states participated in 14 EU programmes and 18 agencies, of which 13 were regulatory and five were executive agencies. For the UK, a wider level of participation might be expected, with the terms of participation in each to be established. To secure greater management rights, and any voting rights, would doubtless lead to bitterly-fought and time consuming negotiations.

There would then be the price tags to be determined – calculated on an actual cost basis – as well as the global contribution and any transitional arrangements over the next Multi-Annual Financial Framework (MFF) This will have to deal with, amongst other things, a potential RAL liability, and any unfunded pension liabilities.

Add the problems of negotiating agricultural quotas and related issues, of acquired rights of nationals of other EU Member States living in the UK (and UK citizen rights in EU Member States), and already there are enough issues to keep multiple negotiating teams busy for many years.

This makes it all the more necessary that we should minimise areas of contention, one of the most powerful reasons for remaining in the EEA and an Efta member. This is also, doubtless, the best chance we have of engineering a speedy resolution to freedom of movement question, even if the naysayers are already rehearsing their excuses as to why this will not work.

At least we are seeing a change of heart in the IEA which, having rejected every submission in the Brexit Prize Competition which proposed continued EEA membership, is now telling us that we should be "saving Brexit from the Brexiteers" by supporting the Efta/EEA option, "at least as a short-to-medium-term solution".

Sadly, this clarion call is still vitally necessary, as there is no indication that David Davis is getting close to a position on the EEA. Further more, we have the likes of Martin Howe still briefing against the EEA, with his latest publication making a thoroughly unhelpful contribution to the debate.

Strongly in our favour if we do decide to remain in the EEA, though, is the fact that the negotiations on our trading status within the EEA will not be conducted directly within the framework of the Article 50 negotiations, and nor will the EU, per se, be our negotiating partner.

As I understand it, amendments to the EEA Agreement have to be negotiated under the aegis of the EEA Council – a body with its own distinct legal identity, with its own rules of procedure. Detailed negotiations are conducted with the EEA Joint Committee which in turn has its own rules of procedure.

Any contracting party (i.e., the UK) can call a meeting of the Joint Committee and, of particular utility to the current situation, any negotiations do not depend on Article 50 having been invoked.

If the UK Government can get its act together on this, then any delay in invoking Article 50 – or delays during the negotiations – need not affect progress in agreeing a broader trading framework. Whatever might transpire though, it looks very much as if we are in for the long haul.

Richard North 20/07/2016 link

Brexit: opportunity knocks

Tuesday 19 July 2016  

One of the most depressing things we now have to confront is a long hot summer of media froth about the "trade deals" that the UK may or may not be able to do, now that we are (or perhaps not) leaving the EU.

What makes it so depressing is the sheer tedium of rehearsing the same old arguments that we have been listening to for decades, whence a newly independent UK supposedly will be able to spring on to the world stage and sign up no end of agreements with nations which hitherto have resisted the blandishments of the EU – countries such as Canada, the United States, Australia, China and even India.

The problem for me is that this represents at several levels the almost complete lack of vision of the "leavers". They are seeking relationships which largely have ceased to have any great relevance, while betraying a profound ignorance about the way international trade really works. They seem to have little idea of where we should be heading to make matters better, or how to exploit our coming freedom.

Pete has a go at this in his latest post, observing that the EU is "stuck in the last century with deals like TTIP" – something we also see in UK politicians. We could, he says, be forging ahead using state-of-the-art trade practices, in which context he offers us the extremely pertinent aphorism: "If we are not talking about regulation and trade facilitation then we're just not talking about trade".

"Our politicians", Pete adds, "need to wake up to this amazing opportunity and to stop fixating on bilateral deals. Things are done differently now and it's time to get with the programme".

The trouble is that, when I tried to explain something of this to the Treasury Committee, telling them that the likes of United States and China had multiple trade deals that didn't register on their radar, all I got from the Chair was the dismissive: "We are in danger of losing the thread, wood for the trees and all that…", followed by seemingly endless discussion about TTIP and conventional trade deals.

Yet some of the most exciting developments in international trade (and some of the most disturbing) were inter-institutional agreements promoted by non-state actors - the so-called new multilateralism. Since these are mostly to do with trade facilitation and are so rarely mentioned, you might get a sense of why I found that response so frustrating.

It actually occurred to me as I listened to the jargon-filled drone from fellow witnesses that the trade "professionals" have become part of the problem. Trade negotiations have become an industry in itself, the protracted discussions becoming part of one vast, self-perpetuating international job-creation scheme.

It was left to me, therefore, as the only one who even mentioned trade facilitation. Compared with that, there were 31 mentions of TTIP – an agreement that's going nowhere and is never going to happen.

Such is the poverty of the vision, however, that all this time is expended on something which the European Commission claims could boost the EU's economy by €120bn, the US economy by €90 billion and the rest of the world by €100 billion. This is trivial when we consider WTO estimates. They argue that bringing global trading up to best practice on trade facilitation could increase global GDP by $1.3 trillion. That, on a pro rata basis, would add $60 billion to the UK's economy.

But then, trade facilitation is all about detail - something these people don't do. Yet detail matters. One-screen systems and the digitalisation of customs documentation alone could save billions – without any of the sovereignty issues raised by TTIP, or the angst involved in accepting Investor-State Dispute Settlement (ISDS).

To get a sense of where the savings might accrue, and what needs to be done, needs our politicians to break out of their mental straitjackets and for them to accept that there is a considerable variety of solutions which they need to address.

Some of these we deal with in Flexcit, where I draw attention to the dull-sounding typology of International Regulatory Cooperation (IRC) mechanisms where, of the eleven categories identified (illustrated above), only one encompasses the traditional trade agreement. Of these eleven categories, the pioneering work of UNECE and its Working Party (WP.6 )on Regulatory Cooperation and Standardisation is far more important.

There are significant gains to be made from pursuing opportunities outside the traditional frameworks, and some gains to be made from adopting a more considered multilateral approach, as opposed to looking for the sort of bilateral deals which are dominating the discourse.

Leaving the EU affords us the opportunity to rethink entirely that nature of our trade policy, and also to think about how we re-integrate trade with other policy domains, after their enforced separation under the aegis of the European Union. Arguably, the greatest damage done by the EU is in forcing policy separation when such matters as trade, aid, defence and migration policies should be closely coordinated.

Unless we can broaden our thinking, many of the supposed advantages from leaving the EU will not materialise, and one of the starting points should be to consider whether actually want to devote any time and energy to negotiating new bilateral trade deals.

When you consider that the current TTIP negotiations stem directly from the Transatlantic Declaration of 1990, they have effectively been in progress for 26 years. As such this typifies the "big bang" approach to trade deals, throwing everything into the pot to achieve some vast deal that never comes off.

An accumulation of modest, unspectacular advances, such as the development of a globally harmonised system of medical device identification could have a far greater effect – and be less demanding on overall resources.

It is far more productive, in our view, to consider "unbundling" and then seeking to secure this type of sectoral or even product-based agreement, preferably on a global scale, and specifically not geographically rooted.

So far though, there is not the slightest trace at official level of any serious thinking on trade policy. We seem to be heading for multiple rounds of "same old, same old", with imagination and innovation taking the back seat. And thence comes the onset of depression. What could be so exciting and energising risk turning into an exercise of studied tedium. There is a vital need, as Lost Leonardo says, to think beyond the bubble.

Richard North 19/07/2016 link

Brexit: free movement and the Single Market

Monday 18 July 2016  

This is an updated and extended post on the Liechtenstein/EEA solution on "free movement of persons", bringing new material and sources, making for as complete a record as possible.

For the forthcoming exit negotiations between the United Kingdom, it is generally regarded as an absolute that the UK's continued participation in the Single Market is dependent on acceptance of all four freedoms written into the EU treaties, including the free movement of persons.

That much was made clear by European Council President Donald Tusk at the informal meeting of the 27 EU Member States (minus the UK) on 29 June 2016. He added: "There will be no single market à la carte", thereby adding his name to a long list of EU officials and Member State politicians who have indicated that changes to freedom of movement are "non-negotiable".

This includes Angela Merkel who recently said during a speech at the annual diplomatic corps reception in Meseberg, north of Berlin, that: "… whoever would like to have free access to the European internal market will also have to accept all basic freedoms in return, including the free movement of people".

However, this lack of flexibility may have more to do with political posturing than reality. The European Commission, by its own account, has "always stressed that free movement was a qualified right and not an unconditional one".

This was in the wake of the Dano case in the European Court of Justice, but referred back to an earlier case where the Court had declared that the treaties and secondary legislation had "qualified and limited" freedom of movement.

The point that emerges is that there is nothing absolute, in principle, about freedom of movement. Therefore, there is no legal bar to variations being negotiated, given the political will. Furthermore, it is the case that the Union has been prepared both to negotiate and compromise on this issue.

Specifically, these negotiations lie within the domain of the EEA Agreement, related to (but not necessarily entirely reliant on) the "safeguard measures" set out in Articles 112 and 113.

It is essential, therefore, that we look fully and openly at the possibilities of the UK seeking a compromise on Single Market participation which will permit national limitations or restrictions on freedom of movement (i.e., immigration) of citizens from EU Member States.

This could be done within the framework of the EEA Agreement, the best example of which is the so-called "Liechtenstein solution". In this post, we look at this solution, bringing it right up to date, and then the wider legal and political issues, and draw conclusions for the record, to ensure that the issues are openly are fully rehearsed.

The Liechtenstein solution: "sectoral adaptation"

Prior to the principality of Liechtenstein joining the EEA on 1 May 1995, the EEA Council – one of the formal structures set up under the agreement – on 10 March 1995 looked at its vulnerability to excessive migration.

It concluded that this microstate could easily be swamped by immigrants if unrestricted free movement of workers was permitted. A territory with a population of 37,000 spread over an area of 61 square miles – less than half the area of the Isle of Wight – would not be able to absorb unlimited numbers.

The Council recognised that Liechtenstein had "a very small inhabitable area of rural character with an unusually high percentage of non-national residents and employees. Moreover, it acknowledged the vital interest of Liechtenstein to maintain its own national identity". It thus concluded that the situation "might justify the taking of safeguard measures by Liechtenstein as provided for in Article 112 of the EEA Agreement".

With that, it asked the Contracting Parties to "endeavour to find a solution which allowed Liechtenstein to avoid having recourse to safeguard measures". However, no long-term solution was found so a temporary expedient was arranged by way of transitional arrangements which allowed the country to impose "quantitative limitations" on immigration until 1 January 1998. These were incorporated into Protocol 15, appended to the Agreement.

Towards the end of 1997, just before the end of the transitional period, there had been no further measures proposed so Liechtenstein unilaterally invoked the Article 112 safeguard measures, thereby continuing to keep the existing immigrations restrictions in place when the transitional period ended.

There were further attempts to resolve the situation in 1998, which were unsuccessful. Then, on 17 December 1999 after a further review, the EEA Joint Committee decided that the "specific geographical situation of Liechtenstein" still justified "the maintenance of certain conditions on the right of taking up residence in that country".

In order to resolve the situation, though, it came up with the proposal for a longer-term solution, allowing Liechtenstein to introduce a quota system controlling the number of workers allowed to enter the country.

This decision was given formal status by an amendment to Annex VIII of the EEA Agreement, setting out what were called "sectoral adaptations", cross-referred to Annex V on the free movement of workers.

The decision provided for a new transitional period until 31 December 2006, and introduced a formal amendment to the EEA Agreement, which allowed for the new measures to apply subject to a review "every five years, for the first time before May 2009". After reviews in 2009 and in 2015, it was concluded that there was no need to make any change to the current rules. The Sectoral Adaptations could remain unchanged.

Under the current arrangement, Liechtenstein issues a limited number (less than 100) of residence permits for economically active persons and a very much smaller number for economically non-active persons.

Half of the totally available permits are decided by lottery, held twice a year. The numbers involved are, of course, small beer, but Liechtenstein is a tiny country. What matters is that a precedent has been set within the framework of the EEA Agreement for suspending freedom of movement in respect of a single country, and replacing with a quota system for what amounts to an indefinite period.

It matters not that Liechtenstein is a micro-state. It is a fully-fledged contracting party within the terms of the EEA Agreement. What applies to one legally can apply to any or all.

Whatever the EU might declare in terms of freedom of movement being "non-negotiable" for EU Member States, therefore, it is undeniable that it is negotiable within the framework of the EEA Agreement, as it applies to Efta states. Therefore, it would appear that the scope exists to agree modifications to the principle of unrestricted freedom of movement, as did Liechtenstein, or unilaterally invoke Article 112 to achieve the same effect.

Safeguard measures

One important point to emphasise here is that while the EEA "safeguard measures" are a mechanism by which changes to freedom of movement could be secured, they are NOT relied upon by Liechtenstein for its current settlement.

With that caveat, it is worth looking briefly at the nature and application of safeguard measures, in general and specifically in relation to the EEA Agreement.

The point about safeguard measures generally is that, far from being rare and exceptional, they are commonly found in trade agreements. They can be found in the draft agreement with Australia and New Zealand, in the trade agreement with Moldavia and, in 1993, when Hungary signed up to an Association Agreement with the EU, Council Regulation No 3491/93 of 13 December 1993 detailed the procedures for applying safeguard measures.

As to the current safeguard measures in the EEA agreement, these are remarkably similar to the arrangements in Council Regulation (EEC) No 2840/72 of 19 December 1972, setting out the Agreement between the European Economic Community and the Swiss Confederation. Quite possibly, the EEA text is based on these provisions.

The EEA safeguard measures themselves can be triggered "If serious economic, societal or environmental difficulties of a sectorial (sic) or regional nature liable to persist are arising". And although such measures have to be "restricted with regard to their scope and duration to what is strictly necessary in order to remedy the situation", there is no specific time limitation.

This contrasts with the only safeguard measures written into Chapter 4 of the Treaty of the European Union (Article 66, TEU) on Capital and payments, which states:
Where, in exceptional circumstances, movements of capital to or from third countries cause, or threaten to cause, serious difficulties for the operation of economic and monetary union, the Council, on a proposal from the Commission and after consulting the European Central Bank, may take safeguard measures with regard to third countries for a period not exceeding six months if such measures are strictly necessary.
The comparison is highly instructive. While Article 66 TEU is self-evidently an emergency measure for highly specific situations, the safeguard measures in the EEA Agreement are most emphatically not an "emergency" provision.

The rules for its use, set out in Article 113, state that it cannot normally be used without first giving at least one month's notice. Only in "exceptional circumstances" can immediate action be taken, and then only to the extent "strictly necessary to remedy the situation". Logically, any provision which has within it an "emergency clause", for use only in exceptional circumstances, cannot in itself be an emergency measure.

Furthermore, while Article 66 is restricted to the highly specific issue of movement of capital which might "cause, or threaten to cause, serious difficulties for the operation of economic and monetary union", Article 112 of the EEA Agreement is much more broadly defined.

To trigger the Article, the Contracting Party can draw on three areas, defined as: "serious economic, societal or environmental difficulties". These can be of a sectorial (sic) or regional nature and the only limiting qualification is that they must be "liable to persist" – the very antithesis of a short-term crisis situation. On this basis, it can be said that "safeguard measures" can be emergency provisions, they are not necessarily so. It depends on the context.

Broader applications of the EEA Safeguard Measures

It has been asserted by Monnet Professor Dougan that the EU has been content to allow "adaptations" to freedom of movement to apply to Liechtenstein only because of its "nature, and the size and the territorial aspects".

However, as is evident from the 1994 Protocol adjusting the EEA Agreement, the original opt-out from freedom of movement provision, implemented under Protocol 15 to the EEA Agreement, applied to both Switzerland and Liechtenstein.

Nor were the safeguard measures confined to freedom of movement. In 1992, when the EEA Agreement was signed, the Final Act records that safeguard measures were invoked by no less than four of the (then) seven Efta members. Austria, Iceland and Switzerland cited the need to protect real estate, capital and labour markets.

The Government of Liechtenstein invoked Article 112 in respect of capital inflows, concerns about access of the resident population to real estate, and "an extraordinary increase in the number of nationals from the EC Member States or the other Efta States, or in the total number of jobs in the economy, both in comparison with the number of the resident population".

It is a matter of record that, after a referendum, the Swiss government was unable to ratify the EEA Agreement and its name was removed from Protocol 15. Had Switzerland not failed to ratify, the likelihood is that both Switzerland and Liechtenstein would currently enjoy exclusion from freedom of movement. Certainly, unilateral safeguard measures are currently being sought by the Swiss Federal Government as a resolution to the 2014 referendum on limiting immigration.

Such a solution has recently been looked-upon favourably by Martin Schulz, President of the European Parliament. He said that the idea of a so-called "safeguard clause", which has been thrown around among members of the Swiss government and parliament as a possible solution, seems promising at first glance. Such a clause, he said, "would introduce quotas after a certain immigration threshold is achieved in specific regions and industries".

As regards Iceland, having recorded its intent to invoke Article 112 in the Final Act, in order to protect its real estate market, it subsequently cast its net much wider in its own domestic legislation.

In Act No 34/1991 on "Investment by Non-residents in Business Enterprises", as amended by Act No. 121 of 27 December 1993 and Act No. 46 of 22 May 1996 – in Article 12 - is the provision that allows the Minister of Commerce to block a particular foreign investment if he "considers it threatens national security, public order, public safety or public health or in the event of serious economic, social or environmental difficulties in particular economic sectors or particular areas which are likely to be of a lasting nature".

In the case of the investment of a resident in a member state of the European Economic Area, it states, "the provisions of Articles 112 and 113 of the Agreement on the European Economic Area shall be observed". Then, in response to the 2008 financial crisis, invoked Article 112 safeguard measures in respect of free movement of capital. This writer's understanding is that the provision still applies.

Moreover, the use of Article 112 has not been confined to just these four countries – or indeed any specific Member State. On 15 December 1995, via Regulation No 2907/95, the Commission invoked the Article on its own account, making the release for free circulation of salmon of Norwegian origin conditional upon observance of a floor price.

It should not be thought, however, that these applications amount to the full extent of the reach of Article 112. The application of the article is entirely dynamic. In the Accession Treaty for Croatia, Article 37 allows for a response to "difficulties arise which are serious and liable to persist in any sector of the economy or which could bring about serious deterioration in the economic situation of a given area", allowing for the application of Article 112 to this provision. Other accession instruments have the same provision.

Transition to the EEA

Given that continued membership of the EEA might afford some flexibility in the application of the principle of free movement, there is a possibility that other members states could block the transition of the UK from EU member of the EEA to Efta member – assuming that the UK was able to rejoin Efta.

So far, we have taken our advice from the Efta Secretariat on this, which takes the view that transitional arrangements are nowhere set out in the EEA Agreement, and will thus have to be settled politically. One possibility is that on leaving the EU, the UK also leaves the EEA and thus, after joining Efta (if we are allowed in), has to apply to rejoin the EEA – this requiring the unanimous agreement of all Parties.

However, on the basis of previous experience, there is an argument for suggesting that the UK can transition from the EU to Efta while remaining in the EEA. The evidence for this rests with the EEA Agreement of 1992, when Austria, Finland, Sweden and Switzerland were also members of Efta, becoming members of the EEA by virtue of their Efta membership.

Then, in 1995, Austria, Finland and Sweden left Efta to join the EU but were not removed from the list of Efta states in the EEA Agreement until 2004. There was, therefore no issue to deal with on transition. Switching the names from one pillar to the other was dealt with as a minor administrative adjustment.

For the UK and Article 50 talks, this has huge implications. It would appear, on the face of it, that membership of the EEA can continue as long as we join Efta. And, if affirmation of this principle is required, it can probably be secured by agreement not with the EU but with the EEA Council by consensus, which does not even require a formal vote.

One might take it that, in view of the positive response from Schultz to the Swiss proposal to introduce unilateral safeguard measures, and the recent statement by French finance minister Michel Sapin, declaring that everything will be on the table in the future talks with the UK, including freedom of movement, there may be some political support for a seamless transition.

Safeguard measures and the United Kingdom

The outcome of a leveraged deal, using Article 112 as the initial platform would – if the Liechtenstein (and potentially the Swiss) solutions prevail – be formal amendment to the EEA Agreement permitting the UK to impose agreed quotas on immigration from EU Member States.

In relation to the solution preferred by some campaigners, the Australian-style points system, a quota system does not immediately answer the requirement, although it could prove an attractive alternative. The crucial issue here is that the "points system" description is a misnomer. Of the migrants admitted to Australia, only 23 percent are afforded entry as a result of points allocation. The overall limit is an arbitrary quota, set annually – currently at 190,000. This is, by any measure, a quota system.

As to the detail, the essential point – it would seem to this author – is that a fully worked-up case must be made for restrictions, using the Article 112 criteria of "serious economic, societal or environmental difficulties", even if the Article itself is not invoked.

In a 1992 proposal for a Council Regulation (EEC) "concerning arrangements for implementing the Agreement on the European Economic Area", procedures were laid down for implementing Article 112. It thus proposed that, where a Member State requested the Commission to apply safeguard measures, "it shall provide the Commission, in support of its request, with the information needed to justify it".

That should provide a sufficient template for the UK in relation to its Brexit negotiations, permitting a reasoned settlement which is capable of attracting political support.


This post sets out possibilities for a solution to the conflict between post-exit participation in the Single Market and limitations on freedom of movement. It shows that, contrary to claims by the Commission and a widespread belief, freedom of movement provisions are negotiable, and that a legal base within the EEA Agreement exists for a settlement.

Although based on Article 112, which acts as a longstop, the expectation would be of a formal amendment to the EEA Agreement, brokered through the EEA Council rather than the European Council, outwith the formal framework of the Article 50 (TEU) negotiations – but linked to them.

Should we chose to invoke Article 112, the important thing to recognise is that it is not bending or twisting the law. Nor is the Article an emergency provision or a "loophole" – it is a fundamental part of the EEA Agreement. Thus, to enlist it to cap immigration is to use it precisely for the purpose for which it was intended.

Given that – for Efta states – its application is unilateral, as an Efta member, the UK would be entitled to invoke it, this being entirely in accordance with the provisions of the treaty, recognised even by the Schuman Foundation.

Without the EEA solution, there is the possibility that there cannot be a resolution to the conflict between those who regard the need to limit immigration from EU Member States as paramount, and those who see an overwhelming requirement to protect participation in the Single Market.

Even then, if there is a negotiated immigration quota, there is the issue of enforcement. It is one thing applying quantitative restrictions. It is quite another enforcing limits in a large country (as opposed to Liechtenstein), where illegal immigrants can melt into their own resident communities and disappear.

Those who hold that we must abolish unrestricted freedom of movement, therefore, need to understand that imposition of controls, per se – enabled by leaving the EU - does not, in itself, bring immigration under control. Enforcement of immigration controls and a substantial raft of other measures will be required.

Additionally, if the initial exit settlement is only an interim measure, adopted for the purpose of easing our rapid exit from the EU, there is an argument for accepting a sub-optimal settlement if no other outcome is available. Once we are no longer members, it will be possible to work on a longer-term settlement which deals more satisfactorily with the freedom of movement provisions.

Crucially, it must be stressed, the bulk of these negotiations are not conducted within the framework of the Article 50 negotiations, but via the EEA Council, which will require some deft legal footwork if its actions are integrated with the UK exit settlement. But all in all, the prospect of a managed compromise on trade and free movement of people, via the EEA Agreement, must be looked at - and urgently.

Richard North 18/07/2016 link

Booker: does Brexit mean Brexit?

Sunday 17 July 2016  

In his column this week Booker starts with reminding us of the obvious – but oft' neglected point that there will be two sides to the forthcoming Brexit negotiations. Our own attention, he writes, has naturally been focused on the three "leavers" appointed to be chiefly responsible for the negotiations: Alexander (aka Boris) Johnson, David Davis and Liam Fox.

The main worry about these three is that they all suffer from the key problem which bedevilled the official Vote Leave campaign: showing little grasp of the tortuous technicalities involved, none of them are known to be "good on detail".

Each them are tapped in the mind-sapping delusion that the UK could negotiate a one-off trade deal, similar to that between the EU and Canada, which would allow us to continue trading freely with the Single Market, while also allowing us to "take control of our borders" and cut further migration from within the EU.

Davis and the rest of the trio even look on with equanimity the prospect of being forced to rely on WTO rules – clearly without having the first idea of the consequences of this option.

But those who have done their homework, says Booker, point out that the trio's ideas are just dangerous wishful thinking. The Canada deal took seven years to negotiate, and would anyway exclude us from significant aspects of the single market, not least those crucial "passport" rights on financial services.

As for relying on "WTO rules" this could even land us in the absurd situation where EU countries could continue exporting to us while we no longer had the EU paperwork needed to sell to them.

This is something that those few pundits who actually think about such things have a great deal of difficulty – denying this possibility. And thereby we see a perpetuation of wishful thinking, bolstered by the profound ignorance which seems to characterise the "leaver" community.

It actually takes little effort to look up the WTO website and look up the rules for Regional Trade Areas and find that RTAs (of which the EU is an example) are partially exempted from discrimination rules, and are thus allowed to impose special conditions on "third countries" – which the UK would become if it left the EU without negotiating a trade deal.

Further explored here (at length – see p.479 et seq), the corollary of this is that the UK, bound by MFN anti-discrimination rules, cannot exclude imports of products from EU Member States, and certainly can't take retaliatory action.

The case, therefore, is exactly as Booker makes out. We could find ourselves in the absurd position where our goods are held up on entry at EU Member State ports, while goods from EU countries sail through customs here, with very little difficulty.

I must admit to getting seriously fed up with the vacuous optimists who so casually assure us that things will work out, without them displaying the least idea of how the EU rules actually work – especially when it comes to the "WTO option".

For goods to be placed on the "Community market" they must conform with the requirements of Decision No 768/2008/EC on a common framework for the marketing of products, with the provisions set out in more detail in the 144-page Blue Book.

Basically, this Decision presents three hurdles: the requirement is for "economic operators" to ensure that the goods to comply with "all applicable legislation", to ensure that all information they provide with regard to their products is accurate, complete and in compliance with Community rules, and that conformity assessment processes are carried out as appropriate.

It is this latter hurdle that presents so much of a problem for those who would have us rely on the WTO option, for there is no provision here for the automatic recognition of conformity assessment procedures. And without recognition, goods will not be permitted entry into the Community Market.

In all probability, there would be little difficulty in securing a Mutual Recognition Agreement (MRA) on conformity assessment, but the point is that the recognition does not come automatically. It must be negotiated.

Thus does Booker remark that it is now being increasingly realised on the continent that the simplest and most practical way for Britain to achieve what we want is to go for that off-the-shelf solution whereby we leave the EU but remain in the European Economic Area (EEA), where we already are, and join Norway in the European Free Trade Area.

Contrary to common misunderstanding, this would in fact give us more influence over the shaping of single market rules than we have as members of the EU. Furthermore, under Article 112 of the EEA agreement, we could unilaterally insist on limited opt-outs from the EU's "Four Freedoms", including free movement of people, exercising a legal right which has already been used a dozen times.

However, the answer to the "British question" that is now being actively discussed in Brussels (which is desperately keen not to see us, or indeed any other country which might wish to follow our example, leave the EU) is a "two-tier Europe", with the eurozone countries at its core, bent on greater political integration, and the rest, including Britain and Turkey, as "associate" or "outer ring" members.

On paper such a compromise might seem quite attractive. Indeed there are those who spoke privately to Mrs May before the referendum who think she might be among them.

But even if we had escaped from some of the political elements of full EU membership, including the European Court of Justice, we would still then belong to what is being called a "restructured Europe", with Brussels at its gravitational centre.

It is this, warns Booker, we need to keep our eye on in the treacherous months ahead. Because it would definitely be very different from the "Brexit" we thought we were voting for on 23 June. In the event, we could find ourselves trapped in a sort of EEA-plus which is very little different from what we would have ended up with had we stayed in the EU through the next treaty change.

The essence here is that concessions made would look so attractive – at a superficial level – that some would be tempted to treat the EEA as the destination rather than the way-station on the way to something better. We must, therefore, keep emphasising that the EEA (in whatever form offered) is only an interim solution.

Richard North 17/07/2016 link

Brexit: Treasury Committee – oral evidence

Saturday 16 July 2016  

The 35-page manuscript from Wednesday's oral evidence is now on-line. There is no written evidence listed as yet, although I did deposit three supplementary papers to accompany my oral evidence while the clerks also distributed copies of the short-version of Flexcit. 

Interestingly, none of the members of the much-depleted committee sought to question me on the document – nor even did they refer to it. And while, in last week's session, Monnet Professor Dougan was given free rein to trash the so-called "Liechtenstein solution", my explicit rebuttal (in my main supplementary document) was not referred to directly and I was not invited to comment on it.

However, committee member Steve Baker did refer to it indirectly, seeking to summarise my position, as follows:
I think the platform you are proposing is that we join the EEA, with a Liechtenstein-style arrangement on freedom of movement, and then move on to adopt and further the model of the UNECE in order to have a more global platform. Have I correctly understood and characterised what you are saying?
There was no mention of Efta, no recognition that we are already in the EEA and could slide over, and no concession to my paper, which was careful not to describe the freedom of movement option as the Liechtenstein solution. My response, though, was as follows:
More or less, yes. Let us concentrate on getting out. Do not forget, this is not just trade. You have defence, you have got security, you have got justice and home affairs, you have got aviation, and you have got space policy. There are all these other issues you have to look at. These are going to take an enormous amount of time, effort and political capital, and there will be trade-offs with trade and other aspects.

We have got to settle those, and if we try to take on too much, in my view, we are going to get into trouble. Let's settle Europe. I said earlier I would quote from this book looking at how we got into the EC in the first place, and the tactic taken was to swallow it whole, swallow it now. In other words, buy in with minimum argument, minimum negotiation, settle a deal. Once you have the deal settled, you use it as a process and then move on to the next stage and the next stage.

Now, Mr Hammond - the other Mr Hammond - was saying yesterday in the Guardian that it would take six years. I see the process taking 20 years, and if you think in terms of Clapham Junction trains, we are taking two trains down similar tracks and only gradually diverging over a period of time. We settle this and move on; settle this and move on, and so on.
There was plenty of meat there for a follow-up but Mr Baker was much more interested in talking to his bestest friend Shankar Singham, whom he had met recently at the Legatum Institute.

Bearing in mind that the inquiry title is: "The UK's future economic relationship with the European Union", it is all the more remarkable that Baker wanted to hear about Singham's "prosperity zone of countries with like-minded attitudes to trade and business" – something not directly related to the issue at hand. Nevertheless, while I got 244 words to sum up the whole of Flexcit, Singham got nearly twice the length to cover unrelated issues.

With somewhat less than stellar clarity, Singham thus told us that:
There would be the contemplation of other agreements until the Article 50 process is concluded and preliminary negotiations and so forth. However, I am not sure that the knowledge in the minds of our negotiators in Europe that we are contemplating these other arrangements and deals is such a great imposition over and above what we are going to have to do anyway.

The thing that is going to take the time and the difficulty here is the negotiation with the EU. That is going to dominate the discussion. These other things, I do not think, are going to be necessarily as complex. However, we need to do something on them, and we need to envisage and envision them, before we conclude with the EU.
This, Baker let go without any discussion of the fact that continued EEA participation is contingent on membership of Efta, or that any negotiations on the vital alterations to the EEA Agreement (a treaty in its own right) are carried on outside the framework of the Article 50 talks, and with an entirely separate actor, the EEA Council. Thus, the talks will be tripartite in nature, with three separate bodies.

Before this exchange, though, Baker has told us that "we are running short of time". He then lets Singham run on for 550 words, and cuts me short on 98 words, saying: "I am sorry to interrupt you, but we are all terribly short of time…". It is at that point that I have raised the issue of negotiating separately with the EEA Council, a point to which Baker never returns.

In fact, this is clearly not my day. There are plenty of interventions from fellow witness, Hosuk Lee-Makiyama, who gets 36 interventions comprising 4,864 words, while Mr Singham gets a remarkable 37 interventions, speaking for 5,608 words. On the other hand, I am rationed to 22 interventions, and a mere 2,387 words – less than a fifth of the total given to witnesses. I am allowed to speak for less than half the time given to each of the other witnesses, and asked very few supplementaries.

Yet much of the material from the other witnesses was addressing world trade rather than UK-EU relations, so the subject was short-changed as well. The core problem of how we plan our immediate exit from the EU (the reason I thought I was there) was barely given an airing. However, there is some material of value, and I will look at some of in the next few days or so.

Richard North 16/07/2016 link

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