Brexit: the news lottery

Tuesday 19 February 2019  



The legacy media is totally addicted to personality-based news, so much so that the value of a news story now seems to depend on whether it can be associated with a celebrity or other well-known person.

Thus, while I broached a Formula 1 story on 22 March 2017, and again on the 26th, after Booker had carried it in his column, the story about the impact of Brexit on the industry has remained largely dormant until now. In fact, of the very few comments on the Booker column, a proportion accused him of scaremongering.

But what has now catapulted the story into the legacy media has been a complaint by a sports personality conveyed by the BBC - none other than Mercedes Formula 1 boss Toto Wolff. He has just made the headlines with the claim that a no-deal Brexit would be "a nightmare scenario" for British-based teams.

This is no more (and in fact rather less) than what I was writing on this blog nearly two years ago, with some considerable detail about the industry and how it might be affected. But such issue-based reporting is of absolutely no interest to our star-studded media until – in this case – a personality in the industry raises it, whence it immediately becomes news, two years after the story was first reported.

No longer is it confined to the speciality press, but it shoots straight into the Guardian, where Wolff is given headline treatment as he describes a no-deal Brexit a the "mother of all messes" for F1 teams.

The fact that any half-awake journalist could have written this at any time over the last two years is neither here nor there. A journalist reporting on issues these days is simply not news. It does not become news until the name of some grand personality can be attached to it.

Thus, the only time the issue has been aired previously is when Jonathan Neale, the chief operating officer at McLaren, warned the result of a no-deal Brexit could "put the ability of teams to stage Formula One meetings at risk". Then, as now, it went straight in the Guardian, then to disappear as there was no further celebrity input to sustain it.

As a result of this dynamic, even the reporting on such vital issues as Brexit becomes something of a lottery, dependent not on the intrinsic merits or importance of the content, but on whether the right person has said anything about it. Without that, the issue can remain invisible – which has been precisely the case with Formula 1.

Here is an industry which is almost entirely dependent on the freedom of movement – of goods and workers – that came with the EU's Single Market. Although championship car racing long precedes our membership of the EU/EEC, the way that the industry has developed, and the pace of race meetings, is entirely dependent on our current status within the EU.

Speaking back in November, Neale recounted how an F1 car had about 14,000 parts and the carry-over between the last race of the year and the first of next year was less than ten percent. Many of those materials were sourced from a number of small-to-medium enterprises in the UK and across Europe, he said.

Developing this thesis, Neale went on to say that some complex sub-assemblies will cross many borders before they arrive here. "If every time a border is crossed there is a transaction", he said, "it introduces a huge amount of inertia and inefficiency to our supply chain. It will be the same for everybody but as a business it is something we would be keen to avoid".

But, from that relatively low-key exposition, we now get the industry waking up to the real consequences of a no-deal Brexit, but it wasn't until last December that we saw serious reporting in the specialist press, with the headline: "Why Formula 1 teams are worried about the impact of Brexit".

Then, Mr Wolff was reported as saying that Mercedes had already "taken steps" to make sure that goods imported from the EU were "not stuck on the border", but Neale pointed out that F1 effectively operates "on a knife-edge" in terms of meeting deadlines when transporting freight for races.

He gave the example of McLaren almost being caught short for last year's Abu Dhabi season finale because of a customs clearance issue over hydraulic parts going into the United Arab Emirates. Three or four pallets were held up in customs for three days and left McLaren "24 hours away" from being stopped from taking part in a vital practice.

Effectively, with the introduction of border checks on F1 movements between here and the continent, it would be extremely difficult to maintain the current race schedule.

Despite that, Wolff still doesn't do detail. The actual legacy media reports are very thin. You would have to go back to my report in March 2017 to get any real sense of the way the industry will be impacted. Then, the legacy media doesn't need detail. As long as it has a "name" to cover its back, that will suffice.

What none of these reports has picked up though is the effect of Brexit on the hospitality operation run by F1. This is an integral part of the industry and does much to maintain the prestige of the sport, also providing the forum where much of the business is done.

Where British cooking was once the joke of Europe, the UK has developed considerable expertise in the highly technical and complex area of event catering. This in itself has become a multi-million pound industry, with its own highly specialised vehicles which travel to each of the meetings from their UK bases, carrying pre-prepared gourmet meals for crews and guests, prepared in high-tech kitchens.

With free cross-border movement currently guaranteed, post Brexit, these vehicles will have to be diverted to border inspection posts for veterinary inspections (yes – pre-cooked meals have to be inspected by vets), before they can travel to the race circuits.

All of this is not just of academic interest. We are dealing with a £9 billion industry which brings thousands of high-value jobs to the UK, with multiple spin-offs which even find applications in fields as diverse as the NHS.

For MPs to be properly informed of the consequences of their actions, in voting down the Withdrawal Agreement and exposing us to the risk of a no-deal Brexit, they needed to know exactly the details which we are beginning to get now but which, even a year ago, were only available on this blog.

It is not good enough, therefore, that the debate has been informed only by a news lottery dependent almost entirely on the intervention by high-prestige personalities and celebrities. Not least, industries which lack high-profile celebrity sponsors, tend to remain invisible.

Who, therefore, is there to speak up for the passenger lift industry or for the vital but totally unglamorous business of manufacturing equipment for use in explosive atmospheres? And when it comes to complex areas such as the Emission Trading System as it applies to airlines, these remain invisible to the legacy media, even after their impact has been felt.

And waiting in the wings is an even bigger issue, a king-sized elephant in the room which has the potential to cause massive disruption in the event of a no-deal Brexit. Mentioned briefly in a Commission Press Release yesterday, this is the VAT system, which will undergo fundamental change.

In a no-deal scenario, the release says, goods coming from or going to the UK will be treated as imports from and exports to a "third country". This means that customs formalities and controls will apply at import and export. Customs duties, VAT and excise duties will be levied at importation, while exports to the UK will be exempt from VAT.

And in those brief words hides a whole world of pain. Although there have been some concessions on VAT, where UK VAT registered businesses importing goods to the UK will be able to defer payment, postponed accounting will not be introduced for parcel consignments valued up to and including £135, which do not contain excise goods and are customs-declared for release to free circulation.

These goods imported from the EU will become immediately subject to VAT before they can be released, adding to the bureaucracy, damaging business cash flows and seriously inconveniencing online purchasers. But, without a figure of the prestige of Toto Wolff to complain, the issue is completely invisible.

The media is quite ready to jump the gun on the official announcement from Honda about its plant closure, before the reasons for company's decision have been formally released. But when it comes to reporting actual news on Brexit, the real news, the personality lottery decides what we get to be told.



Richard North 19/02/2019 link

Brexit: the silence of the dogs

Monday 18 February 2019  



I would readily acknowledge that the relationship between Flybmi's demise and the EU's ETS is complex, and not easy to understand. And without the company's financial information (which has not been released), it would not be possible to determine the extent of its contribution to an event that is obviously a multi-factorial.

How fortunate we are, therefore, that we have the services of Tom Rees, a real journalist in the Telegraph to guide us through the labyrinth and give us the information we need to follow such complex issues.

Obligingly, Mr Rees has written a piece entitled, "What went wrong at Flybmi - and why it won't be last airline to crash land", one where we could reasonably expect to learn something more of the impact of the Commission's decision to suspend the participation of UK airlines in the ETS.

It will come as no surprise, however, to find that that the only thing we have to sustain us is the irony. Of detailed analysis there is none. All that Mr Rees can offer are the observations:
Although Brexit is not the cause of airlines' woes, the industry has been among the loudest critics of the intensifying uncertainty. Flybmi said that the turmoil in Westminster had hampered its ability to "secure valuable flying contracts in Europe" and led to a spike in fuel and carbon costs after the EU decided to exclude UK airlines from full participation in the Emissions Trading Scheme.
In other words, his only reference to the ETS was a copy-out of the Flybmi press release, with no elaboration. The only defence the Telegraph might offer is that, of the hundreds of media articles on this event (and the number does run to hundreds), not one of the many that I have read in any way explains what is happening. The entire press corps seems to have gone AWOL.

If it wasn't for the fact that I find the emissions trading system so immensely tedious, I suppose I would have picked up something of this from the Commission's Notice to Stakeholders published on 19 December 2018 and the UK government's technical notice, which has a publication date a couple of months earlier – although it refers to the Commission's December notice.

Most of the information needed to explain the situation is in the UK government's notice, although it is best to read both publications. Grazing the Commission's annual report helps fill in the background. Neither this nor the notices, however, put the situation in context, nor give any clues as to the potential impact on the aviation industry.

One need not single out this issue, though, to remark on the media's failure to explore this issue. The coverage generally of the notices has been poor, so the climate change and emission trading system is just another of those issues which dropped through the net.

The nearest we seem to have got to a popular media report was in Euractiv, the superficiality of which tells its own story. There was no clue given as to the potential impact of what had been done.

While the complexity of the subject possibly explains why there has been so little coverage, one nevertheless might have expected the specialist publications to have taken up the challenge of explaining the implications. That may have been the case, although if there is a detailed analysis anywhere, I've not been able to find it.

On the face of it, therefore, we seem to have a perfect illustration of the inability of the media – popular and specialist – to evaluate the implications of Brexit in a particular area of economic activity. But, unless there is something substantial that I have missed (and that is quite possible), this failure extends to a wide domain of think-tanks, parliamentary inquiries and all the other information gathering organisations.

The most obvious sources of information, of course, are the trade associations and, in that respect, we do have a comprehensive report from the International Air Transport Association (IATA), published in December 2018. Maybe it was too early to have picked up the effect of the Commission's suspension of UK airline participation, but all we get is generalities, with nothing that stands out in a way that would attract popular media attention.

What we have therefore, is a pack of dogs that have failed to bark – a worrying example that is only one of many. Given the extraordinarily wide range of issues affected by Brexit, that would suggest that we are dangerously ill-informed about the true impact of our leaving the European Union. And, of even more concern, we don't seem to have a system that is capable of conducting timely or effective evaluations.

We are thus going into one of the most important political events of the century yet are staggeringly ill-informed about the potential impacts. Flybmi has brought to light but one "unknown unknown". How many more there are, we have no possible way of knowing.

It is inevitable, therefore, that faced with the extraordinary complexity and the scale of the unknown, the popular media should indulge in trivia. By far the bulk of the coverage has been on the "stranded passenger" level, reflecting the general tendency to focus on human interest stories. We have long ceased to expect the media to handle mere "techie" details.

Everywhere one looks, we tend to see the same phenomenon. Promised a revealing interview with an Airbus "boss" on the impact of Brexit, all we got from the Marr show was the same superficial approach – generalities short of any useful detail.

We are led to believe that the effect of a no-deal Brexit would be "catastrophic" for Airbus, but there was nothing on offer to tell us exactly why. Said Katherine Bennett, "It's time for the politicians to come together and help us not have this uncertainty. And we as business people feel we need to speak up and ensure the facts are out there on the table".

But facts there were none. Not now nor previously have we been presented with a coherent, factual evaluation of the various impacts that might trouble Airbus. A company of this size and resource has both the opportunity and capability to spell out the detail, in precise, clinical terms. All we get is PR spin, in spite of the expenditure of "tens of millions of euros".

At this late stage, it is hard to know what should be done for the best. With the cri de coeur being "uncertainty" though, the most obvious need is to introduce as much certainty into the equation as is possible. But there we are trapped in the same cycle of inadequacy that has contaminated the Brexit debate throughout its entire duration.

Those "silent dogs" are not going to start barking all of a sudden, and even if they did, their noise – by its very definition - would lack coherence. We've possibly left it too late. There is no way we can catch up in time, much less drown out the disinformation.

Details which should have been the currency of debate right at the beginning, even now are only just emerging. Thus we have the Guardian looking at the impact of Brexit on the chemical industry, yet only partially catching up on issues rehearsed on this blog in January of 2017.

The only thing currently in surplus, therefore, is pessimism. At least that comes free, with no limitations on the supply.



Richard North 18/02/2019 link

Brexit: the price of uncertainty

Sunday 17 February 2019  



In the current edition of Flexcit, there are 17 references to certainty/uncertainty. Writ through the narrative is the need to avoid it – uncertainty that is. And now, nearly 32 months from the referendum, we're seeing the headline: "Regional airline Flybmi collapses blaming Brexit uncertainty".

We were, of course, expecting something to go down in aviation, but not this soon and not in quite in this way. Nonetheless, the British airline Flybmi has gone bust, cancelling all flights with immediate effect. And Brexit is blamed as the main cause of the collapse.

Understandably, the spokesperson for Flybmi speaks about the "heavy heart" with which the company has made the "unavoidable announcement", noting that the airline had faced several difficulties, "including recent spikes in fuel and carbon costs".

But here we learn something completely new. The spike in the carbon cost arises from the EU's recent decision to exclude UK airlines from full participation in the Emissions Trading System.

This decision was made on 19 December last year, after the Commission had become concerned about retaining the integrity of the EU ETS after Brexit.

Thus, it decided temporarily to suspend processes related to the UK in the Union Registry (The relevance is partly explained here). It also adopted an amendment to the EU ETS Registry Regulation to lift the marking of allowances issued by the UK during the transitional period in case of ratification of the Withdrawal Agreement.

The suspension of UK-related processes in the Union Registry, we are told, takes account of the fact that, on the basis of the current legislation, from 1 January 2019, any allowances issued by the UK would need to be identified by a country code ("marked") and excluded from surrender.

In order to prevent the temporary issuance and circulation of marked allowances until there was clarity on whether or not a Withdrawal Agreement would be ratified and enter into force, the Commission decided temporarily to suspend the acceptance by the Union Registry of all processes for the UK relating to free allocation, auctioning and the exchange of international credits.

Consequently, from 1 January 2019 onwards the UK has not been able to auction allowances, allocate allowances for free to operators or exchange international credits. This will apply for as long as the suspension remains in place. Only after both the UK and the EU have deposited their instruments of ratification of the Withdrawal Agreement with the Secretary-General of the Council will the suspension be automatically lifted.

Perversely, BMI Regional claimed to have been the first UK airline to complete the 2012 ETS cycle. This meant that the airline was among the first of more than 11,000 airlines, power stations and industrial plants in 31 countries to adhere to a "cap and trade" method of carbon emissions reduction.

Now, having fully bought into the scheme it has been caught by the suspension of the scheme for UK airlines, having to fund the additional carbon credits which hitherto it had been allocated free of charge.

Currently, under the ETS, the free allocation amounts to 82 percent of airline credits. Three percent are held back for high-growth airlines and the 15 percent balance is auctioned. A credit is needed to cover each tonne of carbon dioxide emitted. Auction values are currently about €23 per tonne. 

No details of the costs involved for Flybmi have been released and data are not easy to find at short notice. To give some idea of the sort of costs involved, some earlier costs of carbon offsets were set at £1.60 for a return London-Paris flight and £3.00 for London to Frankfurt.

Another indicator of the sort of money involved comes from calculations on costs passed on to customers, who are required to pay even for the free allowances.

According to a study by a Dutch environmental consultancy, airlines profited up to €1.36 billion in 2012 by passing on "imaginary" costs. At the time, Ryanair was adding a 25p "green" tax levy to all bookings to cover the costs of the scheme.

With Flybmi having carried 522,000 passengers on 29,000 flights in 2018, overall ETS costs are likely to be substantial. In its formal statement, the airlines says that while the summation of issues have undermined efforts to move the airline into profit, current trading and future prospects have also been seriously affected by the uncertainty created by the Brexit process.

"Against this background", it says, "it has become impossible for the airline's shareholders to continue their extensive programme of funding into the business, despite investment totalling over £40 million in the last six years. We sincerely regret that this course of action has become the only option open to us, but the challenges, particularly those created by Brexit, have proven to be insurmountable".

Predictably, the media focus is on the human interest aspects of this drama, so it has not been fully registered that a major factor has been the failure by the Westminster parliament to ratify the Withdrawal Agreement. For other British Airlines, the pain now only goes away when the agreement is fully ratified but, for Flybmi, this will come too late – if it comes at all.

Presumably, British Airways will be similarly affected but, again, no precise costs are available. However, in 2011, it was reported that the airline faced a bill of nearly €50 million a year, the highest of any airline, when carriers around the world were brought into the ETS, and that was based on 81 percent of allowances being allocated free.

If the free allowance is removed, theoretical annual costs could rise by as much as €300 million, for as long as it took to regularise the scheme for the UK – with or without the Withdrawal Agreement. UK air cargo operations will also be looking at their costs. Sources for auctioned credits must also be established, and the loss of auction rights will have financial implications.

On the other hand, if the UK sorts itself out and ratifies the Withdrawal Agreement, UK operators remain subject to EU ETS compliance obligations for emissions in the years 2019 and 2020. But the marking and the exclusion from surrender of allowances issued by the UK would no longer be necessary. Costs would revert to normal.

Whatever does happen, Flybmi will stand as an unexpected casualty of Brexit uncertainty, costing 376 jobs and damaging a number of regional airports, which rely on the airline, including Bristol, East Midlands and Edinburgh. In what is appropriate for a Brexit-related issue, regional connectivity with Brussels will also be badly affected.

And, as parliament chatters and postures, the costs of uncertainty can only increase, adding daily to the unnecessary burden occasioned by political incompetence.



Richard North 17/02/2019 link

Brexit: nothing is clearer

Saturday 16 February 2019  



As I write, the BBC website is full of the latest news about Trump and his wall. And, in its own, pompous, arrogant way, it deigns to instruct us on whether there is a crisis on the US-Mexico border.

The BBC website is full of that sort of thing – there is barely a subject on which it does not feel qualified to lecture us, setting itself up as the "go to" authority on virtually every subject under the sun. All too often, it will advertise itself as precisely that.

The scope of that hubris extends, as you might expect, to Brexit. With insufferable arrogance, the BBC hosts a webpage authored by reporters Alex Hunt and Brian Wheeler, claiming to offer: "All you need to know about the UK leaving the EU".

Given the complexity of the subject, that alone should dissuade anyone from making such a hubristic claim, but even more so when the exact meaning of so many issues is contentious – and often hotly argued – and where, in others, careful interpretation is required.

In the first category, there is a more than adequate illustration where the Hunt and Wheeler pair purport to tell us what the European Union is, asserting that: "It began after World War Two to foster economic co-operation, with the idea that countries which trade together were more likely to avoid going to war with each other".

Here, as a co-author of a definitive history of the European Union, I would not agree. With the preamble to the Treaty of Rome declaring the objective as "the ever closer union" of the peoples of Europe, the "idea" of the EU is and always was the political integration of its member states. Economic cooperation was always the means to the end, and never the end in itself.

Some people would claim that this is arguable. I wouldn't, but even if one accepts that it is, that leaves no room for such a definitive, unequivocal statement of the type made by Hunt and Wheeler. This isn't information: it's propaganda.

As to the other category, we can see a more recent example where the pair address the issue of whether Brexit can be cancelled. They claim that the ECJ has ruled that the UK could cancel the Article 50 Brexit process unilaterally, "provided the decision followed a 'democratic process', in other words, if Parliament voted for it".

Yet, actually, that is not what the judgement says, even if the press release, rather unfortunately, has elided some of the text of the judgement to come up with this statement: "The revocation must be decided following a democratic process in accordance with national constitutional requirements".

At this level, though, there is no reference to a parliamentary vote, merely a democratic process, "in accordance with national constitutional requirements". Arguably, the cabinet of an elected government which agreed a decision by the prime minister to revoke the Article 50 notification, followed by the formal revocation initiated by the prime minister, would satisfy that requirement.

Fortunately, however, we don't have to argue the point. We need only to refer to the actual judgement, which (not unusually) differs in detail from the press release.

In its reference to a "democratic process", it declares that refusing to allow a Member State to revoke its notification, after it had decided to do so "through a democratic process", would be "inconsistent with the Treaties' purpose of creating an ever closer union among the peoples of Europe". Interestingly, we see declared the purpose of the Treaties – and it is not economic cooperation.

This section, though, is part of the preamble and only later does the judgement set out the formal condition for revocation, viz:
… as long as a withdrawal agreement concluded between the European Union and that Member State has not entered into force or, if no such agreement has been concluded, for as long as the two-year period laid down in Article 50(3) TEU, possibly extended in accordance with that provision, has not expired, that Member State … retains the ability to revoke unilaterally the notification of its intention to withdraw from the European Union, in accordance with its constitutional requirements.
Strictly speaking, therefore, the only condition which is relevant to the BBC claim is that the notification must be made in accordance with the UK's constitutional requirements. And again, even if you want to assert that this is arguable, a strict requirement that there should be a parliamentary vote (in favour) is an invention.

With this, and much more, therefore, one rather wishes the BBC would tone down the hubris, and confine itself to statements of fact. But there is more to it than that. There are issues relating to Brexit which are both complex and important, and which would benefit from simple, factual explanations. Properly presented, they would immeasurably enhance the quality of the debate. And yet here, as much as in the explanations they do volunteer, the BBC is often singularly lacking.

To look for a topical example, one does not have to go far. Yesterday, I reported on the conclusion of the US-UK MRA on conformity assessment, emphasising its importance and also (then) noting that the BBC had not reported it.

In fact, it took until after midday yesterday for an article to appear on the website and, from the content, it is very clear that the (anonymous) author had very little appreciation of what an MRA on conformity assessment is, much less how important such agreements are.

It would have helped if the BBC had referred to the agreement by the full title that is found in the government press release, where it is referred to as: "The Mutual Recognition Agreement on Conformity Assessment (MRA)".

Unhelpfully, though, not only does the term "conformity assessment" not appear in the BBC script, neither is there any explanation of what the agreement does. Yet, this is clearly set out by the government, in this passage in its press release:
The agreement will maintain all relevant aspects of the current EU-US MRA when the EU-US agreement ceases to apply to the UK. It helps facilitate goods trade between the two nations and means UK exporters can continue to ensure goods are compliant with technical regulations before they depart the UK, saving businesses time, money and resources. American exporters to the UK benefit in the same way.
It would have improved things if a little bit of detail had been added, such as telling readers something about the context. The issue, of course, is about conformity with local regulations – EU-produced goods with US requirements and US-produced goods with EU requirements.

Without the MRA, goods would have to be tested in advance in the countries of their destination or, when intercepted by the customs on entry, would be tested then – causing considerable disruption (and expense) at the borders.

With the MRA in place, manufacturers in the countries of origin can submit their products to approved testing houses in their own countries and certificates of conformity (attesting to conformity with regulations at the point of intended destination) are recognised by the respective customs authorities, without any need for further testing.

This is a massively important agreement, saving huge amounts of time and money - and is no small thing. The basic EU-US Agreement runs to 78 pages, covering telecommunications equipment, electromagnetic compatibility , electrical safety, recreational craft, pharmaceutical good manufacturing practices, and medical devices. Additionally, there is an agreement on marine equipment.

Together with the lists of approved testing houses, the implementing protocol, the procedural agreements and the specifications concerning assessment and supervision of systems, this is a substantial body of work which will do much to facilitate post-Brexit trade between the UK and the US.

All the BBC can grudgingly concede, though, is that "the UK-US agreement is not a free trade deal - which can relax trading rules, reduce taxes (tariffs) on imports and exports, and grant easier market access".

Yet, this is a trade deal. Make no mistake. While it is not a formal Free Trade Agreement in its own right, MRAs on conformity assessment can be found embedded in most of the modern EU trade agreements. So important are the EU's agreements that there is a special protocol in the EEA Agreement extending them to the Efta states – thus enabling "simplified market access".

And it is there that the BBC have introduced an egregious error, declaring that the agreement "is not a free trade deal - which can … grant easier market access". This simply is not true.

A switched-on organisation could do far better than this. It could not only get it right, it might point out that this is how trading nations organise their affairs when they do not want to commit to full-blown free trade agreements. It could also tell us that these agreements are over and above WTO rules and that countries with sophisticated economies would find it very hard to trade without them. WTO rules are not sufficient.

The UK government is to be congratulated for concluding this agreement. It was very necessary that it should have done so. But it was also very necessary for the media to explain what is going on. The BBC tried, and failed. As for the rest of the media, they don't even seem to have tried.

Where the agreement has even been mentioned elsewhere, as in the Independent, the narrative has been side-tracked into personality politics. It is far more important for the newspaper to tell us that Mr Trump has declared trade links had been "strengthened", with lengthy quotes from the president and Liam Fox than it is to explain to us what the agreement is about. All we get in that quarter is that it allows goods made in the UK to be sold in the US, and vice versa, "with less bureaucracy for manufacturers and exporters".

The Evening Standard falls for the same trap, actually providing less detail than the Independent. The Daily Mail, in substantially more space, manages to say even less on the MRA. Oddly enough, the best (although by no means full) report comes from the non-paper, the Daily Express, which parades the story on its front page as "Trump's Brexit boost for Britain". Predictably, although this rag has been at the forefront in promoting the WTO myth, any reference to WTO rules is absent.

And that, sadly, conceals the ultimate irony. Brexiteers are said to welcome the continuation of the deal, thereby contradicting the very claim made by so many "ultras" that the EU doesn't have a trade deal with the US and relies on WTO rules – permitting the UK to do likewise. It does, and it doesn't, which means that the UK is not even trying to. 

But nothing the media is saying makes this any clearer.



Richard North 16/02/2019 link

Brexit: the annals of emptiness

Friday 15 February 2019  



I gazed yesterday upon the excitable hacks, prattling away from inside and outside the House of Commons, and their breathless interviews of sundry MPs and pundits. And for all the impact and relevance, I might just as well have been watching Japanese reality television – in the original language.

There have been some votes in the Commons. In one of them, a government motion was defeated, 303 to 258 - a majority of 45 against a motion endorsing the government's negotiating strategy – a strategy that had been approved by the self-same MPs only two weeks ago. 

Why there was even a vote, though, no one has yet been able to explain. For a parliament that is so keen on meaningful votes, this was a meaningless one. The defeat, we are told, has no legal force and Downing Street said it would not change the prime minister's approach to (non-)talks with the EU.

To make the proceedings even more meaningless, some amendments were defeated and another was withdrawn. And since none of these votes had any legal implications either and the government is not bound by anything, we are no closer to ratifying the Withdrawal Agreement. We are, however, a few hours closer to a no-deal.

In the meantime, it seems, Mrs May has vowed to press ahead with her Brexit plan – whatever that is. In a statement from Downing Street, her spokesman declared: "While we didn't secure the support of the Commons this evening, the prime minister continues to believe, and the debate itself indicated, that far from objecting to securing changes to the backstop that will allow us to leave with a deal, there was a concern from some Conservative colleagues about taking no deal off the table at this stage".

The spokesman continued: "The motion on 29 January remains the only one the House of Commons has passed expressing what it does want – and that is legally binding changes to address concerns about the backstop. The government will continue to pursue this with the EU to ensure we leave on time on 29 March".

With that, we await the next episode of the soap opera, scheduled for 27 February. Closer to the day, we'll have to focus on it a bit more, long enough to find out what the plotline is. Then, perhaps – or not – we can put it on hold again until the episode after that, when there will be another storyline to follow.

And yes, I know we should care more about what's going on. But that doesn't include exposing oneself to a gibbering troop of half-trained monkeys, filling the ether with their noise, polluting our screens with their self-important posturing. We've had enough of them. We'd had enough of them a while back. But we've really had enough of them now.

Bluntly, the only thing I want to know now is the result of the next vote on the Withdrawal Agreement ratification. I don't want to hear any more progress reports about non-existent negotiations, and I certainly don't want to hear any more breathless reports about what a television reporter thinks he might have heard in a Brussels bar.

I'm also sick to the hind teeth of profound statements from anonymous "EU diplomats" and from the rest of the corps of willing but anonymous informants that the hacks use to pad out their reports. Those who are not prepared to put their names to their statements aren't worth listening to.

And to the next gormless hack who wants to write yet another puerile piece, headlined, "Six things we've learned …", a word of advice. Stay very clear of me or I will put a bullet in your brains. If I have to read another such article, be it six things, or seven things, or eight, I will put a bullet in my own.

By the way, for the simpering little girlie writing for the Telegraph, the Mexican drug-traffickers' weapon-of-choice is not an "AK57". There is no such thing. It's an AK-47 written with a hyphen, you airhead, the most prolific firearm on the planet, with over 100 million made. Next thing, we'll be told that Spitfires are jet fighters.

As for the rest, there are 43 days left to a no-deal – 43 days for the media to fill their papers and populate their studios – television and radio – with trivia, leaving us none the wiser than we are now. Doubtless, we will be a lot more confused.

Nevertheless, there is some prospect of clarity. If we do drop out without a deal, the media can devote their energies to telling us what a terrible time we're having. But, until then, we are expected to put up with the endless speculation and soap opera.

Back in the real world, though – or what passes for it – the government has a little good news to share after the doom and gloom of my previous blogpost. In a press release released yesterday, the Department for International Trade announced that the UK and the US had agreed to continue their Mutual Recognition Agreement on conformity assessment.

This will help facilitate goods trade between the two nations and means UK exporters can continue to ensure goods are compliant with technical regulations before they depart the UK, "saving businesses time, money and resources. American exporters to the UK benefit in the same way".

Highlighting the importance of this agreement, the release points out that the total UK-US trade in sectors covered by the deal is worth up to £12.8 billion, based on recent average trade flows. Of this, the UK exports covered are worth an estimated £8.9 billion - more than a fifth of total UK goods exports to the US.

The agreement, we are told, benefits a range of sectors, including pharmaceuticals. Pharmaceuticals account for around £7.7 billion of UK exports to the US - nearly 18 percent of total UK goods exports to the US. Other industries that will benefit include the tech sector and telecommunications equipment suppliers.

Furthermore, similar agreements have been signed in recent weeks with Australia and New Zealand (announced on 18 January), ensuring continuity and safeguarding revenues for British businesses and consumers.

In respect of the US, this is the first time I have seen specific figures attributed to this MRA and again it underlines the vacuity of the claims for the WTO option. Although MRAs on conformity assessment are not full-blown Free Trade Agreements, they are powerful tools of trade facilitation, and an essential part of any modern trade relationship.

As a measure of where we are with the media, it is interesting to note that none of the major media organs seem to have published the news about the US MRA. And where the BBC refers to the signing of the deals with Australia and New Zealand (and then only recently), it dismisses them as "mutual recognition agreements" and not free trade agreements, failing to note that they cover UK exports worth an estimated £2 billion.

The essence of this experience, therefore, is to confirm (and update) Mark Twain's observation that those who do not read the news are uninformed while those who do are misinformed. Despite the torrent of media coverage on Brexit, most of it is focussed on the narrow band of activity in Westminster, with emphasis on personalities and confrontation.

Another example of the vacuum created by the absence of information in the media– the annals of emptiness – comes with an article about the fate of Formula 1 in respect of Brexit, covered in some detail by Autosport magazine.

Here we have a leading figure in the industry warning that Formula 1 teams cannot risk having their "heads in the sand" over Britain leaving the European Union without a deal. To date I cannot recall any serious coverage of this issue in the national media. And yet, it was in March 2017 - nearly two years ago – that I wrote a comprehensive analysis on this blog.

Thus, while we can rightly complain about our politicians making a pig's ear of Brexit, considerable blame must also go to the legacy media, both for trivialising the narrative and also for the superficiality of its reporting. What should be a detailed and fascinating record of history being made is reduced to the level of a biff-bam storyline that wouldn't even make it into the Beano.

The politicians are, in fact, the easy target (and no less worthy for that), but the drain on our energies occasioned by the impoverished media coverage is also of note. I think, alone, I could stand the politicians. Have the media amplify their stupidity and they become intolerable.



Richard North 15/02/2019 link

Brexit: a paucity of deals

Thursday 14 February 2019  



One of the more prominent scare stories during the EU referendum campaign was the claim that, after Brexit, we would have to renegotiate all the existing EU trade deals with over 50 different countries.

At the time, I was suitably scornful about this claim, arguing that we could apply the "general presumption of continuity" in respect of the treaties and request of the parties that they continue to apply the provisions.

Continued participation would not be automatic and the consent of all parties would be required – including the EU where relevant. But the "continuity" process is well-established requiring formal notifications to be made, followed by straightforward administrative procedures.

The point I made at the time, therefore, was that third country treaties were manageable. For the most part, ensuring continuance was a relatively minor administrative task that could be resolved relatively simply. There was (or should have been) no question of any need for major renegotiations.

Latterly, there have been several reports on this issue, including a comprehensive study for the European Parliament, which looked at future trade relations between the EU and the UK. The 52-page report was published in March last year.

To a great extent, the findings confirm the essence of the argument I had made two years previously, in the March just before the referendum. However, it did make the distinction between the transition period and the future relationship.

During the transition period, it noted that the UK would still be bound by EU law in exactly the same way as any Member State. Although non-EU contracting parties could point out that their agreements no longer appeared to apply to the UK, as it was no longer an EU Member State, absolutely nothing would have changed for the export and trade relationships.

On that basis, all that would be needed was for the EU and the UK to confer with the third countries concerned, and to reach an agreement with them. This could be done by simple exchange of letters, whence all parties could continue to apply the trade agreements as before.

Post-transition was not quite as straightforward, as the legal position would be different. Not least, the UK would no longer be an EU Member State, and would not be able to claim that EU law continued to apply in its territory.

The crucial point, though, would be the UK's degree of disassociation from the EU's internal market. Substantial differences would enable third countries to exclude the UK from their EU-related trade deals. Thus, the report said, whether the UK can continue to benefit from EU free trade deals with third countries "will depend enormously on the future terms of EU-UK trade".

Had the UK decided to take up the Efta/EEA option, ensuring treaty continuity would probably have been relatively simple. Most of the third country relationships that we wished to keep up would have survived – long enough, at least, for us to negotiate new deals without any disruption.

At the other extreme, in a no-deal Brexit, the degree of formal disassociation from the EU's trade arrangements would be absolute. The general presumption of continuity would not apply and we would need to renegotiate 50-plus treaties.

Actually, it isn't even as "simple" as that. We have often pointed out that UK trade relations via the EU are not managed entirely through registered Free Trade Agreements. We also rely on a network of trade-related agreements which are not registered with the WTO and therefore do not qualify as FTAs.

Nonetheless, these are vital to the conduct of our trade and, when I last counted, we were the beneficiaries of 881 bilateral treaties between the EU and third countries, together with 259 multilateral agreements.

Now, with a no-deal Brexit beginning to look a real possibility, we need to be looking hard at these agreements. Even if we stick just to the FTAs, it seems we have something of a problem. According to The Sun, it appears that we have something like 70 FTAs that need renegotiation to cope with a no-deal, with the government promising to conclude 40 of them by Brexit day.

As it turns out though, the likely number that will be concluded is a mere six. Four have already been agreed: Switzerland – signed on Monday - Chile, an Eastern and Southern African block, and the Faroe Islands. Two more deals, with Israel and the Palestinian Authority, are "on track".

Fairly obviously, this relative lack of success is down to international trade secretary, Liam Fox – he who, at one time, boasted that: "The free trade agreement that we will have to do with the European Union should be one of the easiest in human history".

He made a similar sort of claim for the rest of the trade deals. In October 2017, during a fringe event at the Conservative Party Conference, he famously promised that the UK would easily be able to copy and paste all 40 of the EU's external trade deals "the second after midnight" on Brexit day.

"We're going to replicate the 40 EU free trade agreements that exist before we leave the European Union so we've got no disruption of trade", he told his audience, adding – to resounding cheers: "I hear people saying 'oh we won't have any [free trade agreements] before we leave'. Well believe me we'll have up to 40 ready for one second after midnight in March 2019".

All he has left now is to play down his failure, insisting that trade deals are "not a numbers game". The focus, he says, should be on the "proportion of trade we can maintain".

Unhelpfully, one of Fox's civil servants, speaking for him, "would not deny the leaked tally's grim prognosis". Instead, he pointed out that, in 2018, around 12 percent of UK trade took place under formal EU Free Trade Agreements. The Guardian then put the numbers together, recording that the concluded trade deals covered just £16 billion of the £117 billion relying on the trade deals.

Furthermore, when the impact of the additional non-FTA agreements is taken into account – on which we rely for much of our £45 billion exports to the US and our £22 billion to China – then the lack of continuity could prove devastating to our overall export effort. Agreements such as the comprehensive Mutual Recognition Agreement (MRA) on Conformity Assessment with the United States are every bit as important to our trading performance as the FTAs – many of which actually include such MRAs.

Directly confirming the essence of the European Parliament report cited earlier, Fox does at least say that the best way to avoid disruption is for parliament to ratify the Withdrawal Agreement. This, he says, which would maintain Britain's current trading relationships for the duration of the two-year transition deal, until alternative arrangements could be made.

What he doesn't say, but perhaps should, is that the situation makes a nonsense of the "ultra" claims about the WTO option. Clearly, if trading solely under WTO rules was all that it was made out to be, we wouldn't have Fox struggling to replace the EU trade deals before we drop out of the EU.

If we ever get so far as to suffer a no-deal Brexit, those who believe that WTO rules will sustain UK trade will at least be fully acquainted with their folly.



Richard North 14/02/2019 link

Brexit: when the believing has to stop

Wednesday 13 February 2019  



If one were to sum up the entire proceedings of the House of Commons over the last few months, one partial sentence from yesterday's session might suffice: "Order. There is a lot of noise and heckling …".

That was the speaker intervening during the prime minister's statement yesterday, a sign of how the ill-disciplined rabble are dealing with the most important political event of the century. "I think it is right that she should have a proper and respectful hearing", the speaker went on to say, "and the same courtesy must be extended to the leader of the opposition in due course".

Respect, of course, is something almost completely missing in the Commons, between the different factions and between members, and not least from the SNP's Ian Blackford who called the prime minister a liar before being forced to apologise.

Calling a Member or Hon Member a liar is not permitted in the chamber – on pain of suspension – which makes for the odd situation where the penalty for calling someone a liar is greater than it is for actually lying. Mind you, Blackford had just accused the prime minister of living in a parallel universe and that, apparently, is permitted. He was also allowed to call the prime minister's deal "a fraud".

But if respect is hard to come by in the Commons, that is nothing compared to the sentiment outside the institution. There can rarely have been a time when the MP collective has been regarded with such profound contempt by the public at large - and even by the international community, with the Czechs remarking on the infantilisation of politics.

If contempt solved anything, we would be well on our way to a rapid solution for Brexit. Sadly, that is not enough. And nor, it would seem, are Mrs May's efforts.

Her statement told us nothing we didn't already know: that the EU will not reopen the withdrawal agreement while the UK "needs to see legally binding changes to the backstop, and that that can be achieved by changes to the withdrawal agreement". With that in mind, the UK and EU teams will hold further talks to find a way forward, whence president Juncker and the prime minister will meet again before the end of February to take stock of the discussions.

That was basically it, following which we were told:
The talks are at a crucial stage, and we now all need to hold our nerve to get the changes that this House requires and to deliver Brexit on time. By getting the changes we need to the backstop, by protecting and enhancing workers' rights and environmental protections and by enhancing the role of Parliament in the next phase of negotiations, I believe we can reach a deal that this House can support.
Understandably, opposition leader Jeremy Corbyn was less than happy. "Our country is facing the biggest crisis in a generation", he said, "yet the prime minister continues to recklessly run down the clock".

Complaining that we had been promised a deal last October that did not happen, with a promise of a meaningful vote on a deal in December, which also did not happen, he asserted that MPs had been told to prepare for a further meaningful vote this week.

But this was to be after the prime minister had again promised to secure "significant and legally binding changes to the backstop". And this had not happened. Now, Mr Corbyn declared, "the prime minister comes before the House with more excuses and more delays".

To be fair, despite a lot of happenings not happening, Mrs May had come before the House with something quite special. She had delivered a belief system. And the basis of this new faith is simple: while the EU is not prepared to reopen the withdrawal agreement, the prime minister believes her team can ignore everything she is told by the EU and negotiate changes that the EU says won't happen.

This belief will sustain the prime minister until the end of February, and Mrs May was generously inviting MPs to join her in this exciting exhibition of blind faith. Nor can this be so very much to ask. As we leave February and enter what should be the final month of the Brexit process, we will enter uncharted territory. Then the believing has to stop and Mrs May will have to deliver.

Very few people, I would venture, would be prepared to wager serious money on Mrs May delivering. So the smart money is on speculating on how she will spin her failure – with or without the help of the EU. We wait in awe to see whether she can put something to parliament that will motivate enough MPs to ratify the withdrawal agreement.

This, we are told, will happen on 27 February if it is to happen at all. If it doesn't the government will table another of those magical mystery amendable motions, allowing MPs to play their incomprehensible games – incomprehensible to themselves and just about everybody else.

As to what happens after that, there is already considerable speculation, centring around a choice between accepting a revised deal or a prolonged extension to the Article 50 negotiations.

For want of that, the media can always do what it does best – make things up. There is nothing wholly out of bounds, right up to a military coup, if that takes your fancy.

That should keep the media entertained until the next possible milestone, which could be as early as 13 March. If parliament has by then not ratified the withdrawal agreement, MPs might get to opt for a no-deal Brexit or request the government to seek an extension to the Article 50 period.

After that, there is the European Council scheduled for 21-22 March in Brussels. There, in theory, Mrs May could broker a last-minute agreement and rush it home for parliament to ratify it before the skies fall in.

This would involve running a cart and horse through all known statutory procedures, cutting the usual waiting period for international agreements to be ratified.

The timescale makes this more than a little fanciful, but it would also breach the EU's procedural guidelines. The European Council (EU-27) does not engage directly in the negotiation process. It approves the mandate and allows – in this case – the Commission's Michel Barnier to get on with the job, then responding to his recommendations.

Basically, therefore, if there is nothing agreed by the time the European Council meets, the chances are that the game will already be over. But that doesn't stop the media speculating about a make-or-break vote in the Commons on 26 March, 72 hours before Brexit – based on whatever is decided in Brussels.

The narrative for that is that MPs would either be given the stark "deal or no-deal" choice, with Mrs May daring MPs to dump the nation in the mire, or then be given the choice between Mrs May's deal and a prolonged Article 50 extension.

Given that choice, it is thought possible that MPs could opt for the deal – assuming the choice is real, where the EU-27 would be prepared to approve any extension. There is some hope that the ERG members could react positively to this, fearing that Brexit might be cancelled altogether if a long delay is accepted.

Nevertheless, the need for unanimous approval of all 27 Member States would make this a high risk strategy. Any one of them could refuse to play ball or demand conditions that prove unacceptable. And then, the period offered could end up being very different to what the UK actually asks for.

And all the time, 29 March looms as the automatic deadline, when, in the absence of a withdrawal agreement, the treaties cease to have effect. There still seem to be many MPs who don't realise what default actually means. It is not possible, by procedural means, to take a no-deal "off the table".

With that, we have no means of knowing whether Mrs May's real intent is to secure a no-deal Brexit and, despite her denials, is running down the clock. But if she is actively seeking to avoid a no-deal, she has an odd way of showing it. Her approach to Brexit is daily looking less like a coherent policy and more like the despairing tactics of the Imperial Japanese Navy in late 1944, resorting increasingly to Kamikaze strikes. 

There is no way that this ends well.



Richard North 13/02/2019 link

Brexit: scanning the horizon

Tuesday 12 February 2019  



There is possibly only one person in the world who knows what Mrs May intends to do – and that's Mrs May. But it is just as possible that she herself doesn't know what she's doing – or has simply run out of options.

For the rest of us, though, we have no way of knowing the difference. Not even the media "in-crowd" have any idea of what is going down so, like the rest of us mere mortals, they are reduced to speculating – some at greater length than others.

Needless to say, this is a highly unsatisfactory situation. Despite following the Brexit drama since its inception, I personally have no more idea of what might happen than the proverbial man in the street. Anybody's guess is as good as mine. We might as well flip a coin.

That said, if I was forced to put money on the outcome, it would be the no-deal scenario – occasioned simply because Mrs May had failed to get the Withdrawal Agreement ratified, and parliament didn't have the wit to call a halt to the madness into which we're descending.

If it's any comfort, the "colleagues" don't have a much better idea of what's going to happen than we do, illustrated by yesterday's press conference with Xavier Bettel, prime minister of Luxembourg, and Michel Barnier.

Barnier picked up on the theme introduced by a series of slides published earlier in the day, explaining the Withdrawal Agreement – sixty sheets in document form, including the cover sheet.

The slides start with a statement from Barnier, drawn from 25 November when the Withdrawal Agreement was finalised. It has him saying: "We have negotiated with the UK, never against the UK. This deal is a necessary step to build trust between the UK and the EU. We need to build, in the next phase, an unprecedented and ambitious partnership. The UK will remain our friend, our partner and our ally".

It looks here as if the EU is getting in its narrative first – not sitting back waiting to take the blame for the collapse of the deal. And, in Luxembourg, Barnier starts off in much the same way, saying that the Withdrawal Agreement was negotiated with the UK, not against it. The EU has no intention of punishing the UK or acting against it.

The backstop, Barnier says, was agreed but the future is not one where they envisage putting it into effect. Using the political declaration they look forward to working out a future relationship between the EU and the UK as partners, as friends.

However, embedded in the velvet glove is the steel fist. The EU needs the border in Ireland to protect the safety of its citizens, to protect their industry by ensuring that their conformity is maintained. They cannot – and therefore will not - allow goods to enter Ireland from the UK without controls.

Brexit, the retrait ordonné (orderly withdrawal) was agreed with the UK, with Mrs May herself. It was agreed with the countries of the EU and cannot be renegotiated. And so, the EU still hopes for an orderly withdrawal but it must prepare for every scenario, including a no-deal. And so endeth one of a series of flat statements, repeating what has gone before, with a resigned acknowledgement that the EU is reconciled to the worst outcome.

One almost gets a sense of fin de siècle. There is no last-minute appeal to rationality, or any suggestions as to how things might proceed. All we got was a warning. "Something has to give," Barnier said, with a reminder that the time left was "extremely short". The EU was "waiting for clarity and movement from the United Kingdom", something that Barnier must know that he is not going to get.

Back home, we still get endless prattle from the media about parliament introducing a motion to "block" a no-deal, a move which – if pursued – will indicate that parliament has failed to understand the limits of its own power, alongside the media's inability to appreciate the finer points of our constitution. As it stands, no-deal remains the default under Article 50, leaving open only three possibilities if it is to be prevented from taking effect automatically on 29 March.

The first is the one we've more or less written off – the ratification of the Withdrawal Agreement by parliament sometime before the date. There is even talk of this happening within the last days of March, which is a possibility. But there is no second-guessing the mood of parliament. A troop of baboons would be easier to predict.

A second option, one that has been well rehearsed, is the delaying action: seeking an extension to the Article 50 period. Some appear to assume that all we have to do is ask and it will be granted. But the unanimous assent of the EU-27 is required. This cannot be taken for granted and the price demanded might be unacceptable – even if an agreement was in the offing.

That leaves option number three, the unilateral revocation of the Article 50 notification – stopping the Brexit process in its tracks. But this is not for parliament to decide.

The confrontation was skirted last time but, if a vote instructing the executive to take this option ever succeeded, it would precipitate a constitutional crisis. The power to revoke the notification rests with the prime minister as the custodian of residual crown prerogative. It is not for parliament to intervene.

Take down all three and leaves us where we started, looking down the nose of a no deal – but not just yet. Today, if the Guardian has it right, Mrs May is going to indulge us with her latest round of can-kicking. She is to ask the Commons to give her another fortnight's grace to keep up what amounts to the pretence that she is renegotiating the backstop.

This, I suppose, beats Jeremy Corbyn's pretence that he is capable of making an intelligent contribution to the Brexit debate, so much so that the prime minister is casting him adrift. Labour wrote itself out of the script right at the beginning and that's where it intends to stay. It is not even worth the time and effort charting the convolutions emerging from that quarter.

For us mere mortals there is no escape from the eternal soap opera presented to us by a media desperate to keep some sort of narrative going. Thus we are assailed with endless speculation, titillated by court gossip and lectured by knowing commentators, all with the intention of projecting the impression that it is possible to know the unknowable.

Just occasionally, it would not hurt to return to earth and address the most straightforward of issues: there is only one certain way to avoid a hard deal, and that is for parliament to ratify the Withdrawal Agreement when (or if) it is again submitted to a vote.

At the moment, we don't even know when that will be, or under what terms. Even now, having left it so late, the damage will be incalculable. But that is the price of allowing our political system to disintegrate, letting the morons take over.

In a situation replete with so much irony though, one simply cannot ignore yesterday's editorial in the Telegraph, where the teenage scribbler responsible complains about the lack of activity in parliament and argues that, if we really are heading for no-deal, this week should be crammed full of the legislation that will be needed to ensure that a no-deal "can happen relatively smoothly" on 29 March.

This, of course, is the newspaper which, perhaps more than any other, has embraced the idea of a no-deal so it would have a vested interest in making it work "relatively smoothly". But, if we are anywhere near close to understanding the ramifications, any belief that a no-deal could be "relatively smooth" is absurd.

Still, with less than 50 days to go, we have a new game in town. We stand poised on the brink of the precipice, scanning the horizon for the last-minute miracle that will drag us back from the edge and make everything right. Doubtless, there is a deep-seated belief that, like the Hollywood westerns of old, the US Cavalry will come charging over the hill, just at the point when everything looks lost, and save us from the ravaging Indians.

Just nobody please mention Little Bighorn or General Custer. The nation is in the market for fairy tales, not gritty realism, as we go through the motions of giving a damn.

Cartoon: Chris Cairns@cairnstoon - commissioned and first published by Wings Over Scotland, 9 February 2019.



Richard North 12/02/2019 link

Brexit: the Singapore myth

Monday 11 February 2019  



If I had the time and energy, I would probably enjoy deconstructing Roger Bootle's latest piece in the Telegraph where he argues that once we are free of the EU's "over-wrought regulations", our country can thrive.

But at least we can make a start on one little gem: in making a case for reduced regulation in the UK, Bootle praises Singapore. He states that few people have fully understood the way that country really works. It is certainly not a paragon of laissez-faire, he states, acknowledging that the state is extremely powerful and plays a major role in the economy.

What should not go unchallenged are his key points, where he asserts that Singapore's regulations are made by Singapore for Singapore, with a keen eye on promoting growth and fully aware of the economic consequences of excessive restrictions. The excellence of its economic governance, Bootle claims, is the reason why this tiny island has transformed itself into one of the world's most prosperous countries.

This, I suppose, is what is technically known as bullshit. The reason why Singapore has grown so significantly came from the decision in the late 70s and early eighties to develop the then limited port facilities into a major container port, turning it into a regional hub serving the Asian "tiger" economies.

Much of the development depended on the influx of migrant labour, creating an unbalanced demography where, currently, the island state in 2015 with a population of just over five million recorded 29 percent non-residents.

That alone, would preclude the UK following the Singapore model but that is not the least of it. That famous laissez-faire regulatory regime has its darker side, where Singapore has become a destination country for women and girls trafficked for the purpose of labour and commercial sexual exploitation.

Not only that, it has also become a global hub for the exploitation of maritime labour, where its vibrant recruitment agency sector has become the by-word for modern-day slavery, exploiting (mainly) Filipinos, but also sailors from India, Indonesia, Mauritius and Tanzania.

Just to add to this glowing picture, Singapore's exports have been falling and last December they fell 8.5 percent in its worst decline for two years, slowing further from a 2.8 percent decline the month before.

Nor is the overall picture much better with a recent poll of economists expecting the Singapore economy to slow a notch further in 2019 than predicted. A significant problem is the trade war between China and the United States. Shipments across Asia are noticeably in the red and the trade data almost certainly means a downward revision to GDP. And nor is this helped by the expansion of Shanghai, which has displaced Singapore as the largest container port in the region.

Pundits generally are gloomy, noting that Singapore's stellar record of economic growth can no longer be taken for granted.

Perversely, one of the main reasons is that the nation's labour force growth – one of the two main pillars of economic growth along with productivity growth – is slowing to a crawl. Between 2006 and 2010, the labour force grew at an average of about 4.5 percent a year. This slowed to about 2.4 per cent a year between 2011 and 2016.

Now, low birth rates are partly to blame. Singapore already has a high labour force participation rate and is grappling with an ageing population, further stunting the growth of the resident workforce. And despite government intervention and considerable investment, productivity growth continues to disappoint.  

Although no one would begin to suggest that the Singapore economy is a basket case, or anywhere near approaching one, this nation is far from the nirvana that Bootle suggests. And, while it continues to freeboot on much of its regulation, international pressure is increasingly forcing the Singapore government into line.

But the ultimate irony is that Bootle's claim that "Singapore's regulations are made by Singapore for Singapore" is just as hollow as the rest of his assertions. The Singapore government considers itself part of the international community and has fully integrated its banking regulation with the Basel standards.

The Monetary Authority of Singapore (MAS) is a member of the Basel Committee on Banking Supervision (BCBS) and the Financial Stability Board (FSB) and actively participates in its discussions on the global financial system and banking supervision.

The government itself states that standards issued or developed by BCBS and FSB "are taken into consideration, where relevant to Singapore". For example, MAS Notice 637 implements Basel III capital standards for Singapore-incorporated banks, and establishes the minimum capital adequacy ratios for banks incorporated in Singapore.

This stands to reason as only international pariahs such as North Korea can stand apart from the global regulatory system. Thus, the Singapore government also works closely with the EU on regulatory issues, and especially on financial services.

The contact is organised through the Financial Services Committee (FSC) of the European Chamber of Commerce in Singapore (EuroCham), which represents the European financial services industry in Singapore. EuroCham itself "engages with market participants, regulatory authorities and other stakeholders on important issues concerning the financial services industry".

This works under the aegis of the EU–Asia Pacific forum on financial regulation. And, unsurprisingly, the topic of its 2018 meeting was "EU and Asia-Pacific regulators meet in KL to strengthen cross-border cooperation and regulation".

The parties involved were regulators from the European Commission Directorate-General for Financial Stability, the European Securities and Markets Authority (ESMA) and Asian regulators participating to the International Organisation of Securities Commissions (IOSCO) Asia-Pacific Regional Committee.

They met in Kuala Lumpur to discuss regulatory developments in the two regions, including cross-border implications of EU regulations. Illustrating the international scope of the forum, the meeting was also held back-to-back with the IOSCO Asia-Pacific Regional Committee meeting.

Oddly enough, the first meeting in 2016 was held in Singapore, where the agenda was future regulatory developments at EU and at Asia-Pacific level; issues and challenges that may arise in cross-border coordination for regulatory purposes; and forward-looking and emerging policy priorities for the global regulatory agenda.

Of course, there is no suggestion that the Asian and European systems are fully integrated, but there is clear evidence that they are working together, and will be closely cooperating in the future – and especially Singapore which only recently signed up to the EU Singapore Free Trade Agreement.

Looking at the detail at that FTA and the Investment Protection Agreement that runs alongside it, it cannot in any way be said that Singapore is any more standing alone as a wholly independent regulatory entity. Bootle, as he so often does, is talking nonsense.



Richard North 11/02/2019 link

Brexit: this insanely unnecessary shambles

Sunday 10 February 2019  



"Despite its reception elsewhere", Booker wrote for the Sunday Telegraph this week, "regular readers of this column will not be unfamiliar with the point so deliberately made by the European Council President Donald Tusk. This was when he said "I've been wondering what that special place in hell looks like, for those who promoted Brexit without even a sketch of a plan how to carry it out safely".

That was Booker's opening paragraph, which was then followed by this:
In 2015, before the referendum, the Vote Leave campaign was presented by my expert friend Richard North with a long and detailed analysis showing why the only way for us completely leave the EU without seriously damaging our economy was to join the European Free Trade Association, thus remaining in the European Economic Area with free access to the EU market (and no Irish border problem). Vote Leave's director Dominic Cummings rejected this paper on the grounds that proposing any specific plan would only provoke fractious argument.
However, without any further intervention from Booker, when the piece came to be published in the newspaper, this is all the reader was allowed to see:
In 2015, before the referendum, the Vote Leave campaign was presented with a long and detailed analysis showing why the only way for us to leave the EU completely without seriously damaging our economy was to join the European Free Trade Association, thus remaining in the European Economic Area with free access to the EU market (and no Irish border problem). Vote Leave, however, decided against proposing any specific exit plan as that would only provoke fractious argument.
There is something particularly Soviet about this behaviour, redolent of May 1920 when Lenin gave a famous speech to a crowd of Soviet troops in Sverdlov Square, Moscow. In the foreground were Leon Trotsky and Lev Kamenev but, in later copies of this photograph, both these figures had completely disappeared.

So it is here. Booker's "expert friend" Richard North is not allowed to appear in the column (except when occasionally allowed as Booker's co-author) and, since the favoured child Dominic Cummings is portrayed in an unfavourable light, the reference to him is discreetly erased from the record.

One is reminded of Dr Tim Coles, author of Real Fake News who, in this clip ,talks of the "propaganda of omission" – keeping issues out of the public domain as a means of keeping them off the agenda. "If you're given facts and information", he says, "you can counter it, but if you're not told about key information and analysis, you can't even think about things".

In respect of the Telegraph, Booker and I have been putting up with this for some years but, for me, the sentence is wider than just this newspaper. Not only have I been deliberately no-platformed by a wide variety of media organs, any mention of the exit plan we pioneered has been ruthlessly excluded from the debate. Despite over 100,000 downloads before the EU referendum, Flexcit is almost completely invisible.

Yet, when it's convenient, we see a crack appear in the system, albeit a small crack, when columnist Juliet Samuel is allowed to make a brief reference to the plan.

Writing in the Telegraph under the headline, "Brexiteers are rejecting exactly the kind of Brexit they used to want", she also picks up on Tusk's outburst, but with a difference.

The reason why Brexiteers have "so spectacularly failed to take control of the negotiations over the last two years" she asserts, is not, as Donald Tusk claimed this week, that they had no plan. They were flush with plans – pamphlets, articles, speeches, journals.

"There's Flexcit, a 400-page blueprint for leaving the EU over a 20-year period. There's Change or Go, a 1,000 page dossier laying out every option under the sun", she says, and "there might even be a feasible strategy for a no-deal". The problem, she avers, "is that the Brexiteers have so many plans and they change so often that they can't unite consistently behind any of them".

Before we go any further, though, we should note that Mr Tusk was not exactly in analytical mode, complaining about a lack of any plan, per se. His precise concern was for those who promoted Brexit without even a sketch of a plan how to carry it out safely. That there were plans aplenty is not disputed – although Change or Go wasn't one of them. The problem was that, when it really mattered, the official leave campaign, Vote Leave, rejected in its entirety the concept of having a plan – any plan. Brexiteers weren't given a chance to unite behind a plan – there wasn't a formal plan around which they could unite.

Had there been an open debate about the plan to adopt, and the campaign had broken up without a decision being made, then Juliet Samuel might have had a point. But what the campaign suffered from was that unique act of political cowardice on the part of Dominic Cummings and his colleagues, making a decision on behalf of the entire campaign, that there should be no plan.

But there is another issue here as well, one which the Telegraph would never allow Juliet Samuel or any of its writers to make. And that is the failure of the media to question the absence of a plan – to scrutinise the leave campaign and bring it to account.

Instead, the media went for the soft option of pursuing the personality-driven campaign that was presented to it, largely avoiding the technical issues or dealing with them at a very superficial level, usually on a "biff-bam" adversarial basis.

During the campaign, though, there was one particular episode where David Cameron went to Iceland in late October 2015 and took the opportunity to denigrate our "Norway-style" future outside the EU, arguing that Britain would end up having the worst of all worlds if it adopted Norway's approach to the EU.

Bizarrely, at that point, the entire leave "aristocracy" joined in to make common cause with Cameron. Ruth Lea blithely told British Influence that "we all agree … Norway is not the way" and John Redwood declared: "Eurosceptics don't want the Norwegian model".

At the time, the Leave Alliance upped its tempo, with our group of bloggers actively supporting the Norway option. Yet, as I remarked at the time, nothing of this mattered to the guardians of ignorance. Of the legacy media, I wrote, "we are invisible – we simply don't exist. As for Flexcit, it is as if it was trapped in the enchanted forest, where the text fades to invisibility when viewed by someone from the inner circle".

Nicholas Soames wearing pink socks in the House of Commons got more publicity than Flexcit gained throughout the referendum campaign. Not once were either Booker or I – authors of the seminal history of the EU, The Great Deception - interviewed by the BBC.

Then and to a great extent now, there were two campaigns. The establishment-sanctioned effort, and the campaign run by the people. "We", I wrote, "are invisible. In the collective establishment mind, we don't exist as sentient entities. On voting day, we become the cannon fodder, to do as we are bidden".

It is simply not good enough, therefore, to pick on the issue of the backstop, as it stands now, and point to the incoherence of the leave response. The reason why we have ended up with the backstop is because Mrs May, in her fateful Lancaster House speech, rejected the idea of our continued participation in the Single Market. And that, to a very great extent, goes back to that October in 2015 when both sides appeared to round on the Norway option.

Not then, and not to this day, has any journalist gone into print to explain Flexcit, nor even to explore the Efta/EEA option properly. Mostly, when the hacks refer to Norway, they trot out the same tired clichés of "pay, no say", without the first idea of what they are talking about.

Sadly, this ignorance also prevails in the mind of Juliet Samuel, who manages to assert that the backstop is very similar to "nearly all" the plans that had been endorsed by Eurosceptics. It delivers, she says:
… all of the following elements of Brexit: an end to EU budget payments, full control over immigration, total control over the services industries (including finance) that comprise 80 percent of our economy, substantially increased control over all other industries, the right to reject any future EU employment, environmental or social legislation, control over farming and fisheries and an end to the jurisdiction of EU courts.
Even there, she is wrong. The backstop applies to Northern Ireland and delivers regulatory alignment in the province. The Withdrawal Agreement then takes us out of the EU but, in the longer-term, issues such as payments to the EU, immigration, services, and the other matters, will be determined during the talks on our future relationship.

What we most certainly don't get is the structured relationship afforded by membership of the EEA, with its institutional provisions and mandatory consultation on new, EEA relevant laws.

Thus, for all that Juliet Samuel has the luxury of a longer piece on the subject, it is still Booker who finishes off closer to the truth, despite the censorship from the Telegraph. Initially, he writes, "Theresa May insisted that she still wanted 'frictionless' trade with the EU, but was then persuaded by her ultra-Brexiteers that she should trigger Article 50 without any practical idea of how this could be achieved".

For two years we stumbled on through the negotiations, he adds, with the Brexiteers coming up with one unworkable proposition after another, none of which showed any understanding of the reality of what we were up against, until we reached the present complete impasse, making it ever more likely that we could face the ultimate disaster of leaving without a deal.

"I'm afraid" he concludes, "Tusk was entirely accurate in identifying the real cause of this insanely unnecessary shambles, the catastrophic consequences of which may be with us for decades to come". And it is so very telling that Booker is not allowed to disclose more about this "insanely unnecessary shambles".



Richard North 10/02/2019 link
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