Brexit: the plot thickens

Sunday 20 August 2017  

Far from being the random outpourings of an inadequate academic, it now looks as if Kevin Dowd's IEA paper is part of a considered "Ultra" strategy to foist their own exit plan on the nation.

The clue to this is a hubristic article in the Financial Times by Bernard Jenkin, chairman of the European Reform Group steering committee – the holy of holies of the ultra creed.

In Jenkin's view, the British establishment has accepted there will be no "soft Brexit". The reason, he says, is because the EU won't have it and nor will the large majority of people in the UK. They, we are told, "now accept we must implement the fundamental principles behind the Leave campaign - to take back control of our borders and laws".

But this is a man who believes that an EU-UK free-trade agreement is far simpler than, say, an EU-Canada one, since UK and EU regulation and product standards are fully aligned and we already have no tariffs.

On this, there is no getting through to the man. No matter what, in his book, regulatory convergence is the magic key to opening the door to post-Brexit trading with the EU. Any complexities are "entirely bureaucratic and political", vastly amplified by vociferous campaigns run by those who still hope the UK will not leave.

Now, after "courteous and open disagreement between ministers along the way", there is an emerging consensus in favour of negotiating an "interim period" which will tide us along until we can conclude the "simple" free trade agreement that their target.

The real give-away, though, is the precise nature of the "interim period" which is so easy that I can't imagine why none of us thought of it before. All we have to do is agree with the EU that we both apply zero tariffs and then – the really clever thing – agree to "mutual recognition of products and standards".

This was precisely the USP promoted by Dowd and, ostensibly, is the answer to the maiden's prayer, avoiding any of the difficulties raised by having to conform with EU regulation. All that has to happen is that they (the EU) accepts all our laws, and we accept all theirs – simples.

Of course, with our agreeing to maintain the same tariff levels on all third country goods entering this country, there should be no case whatsoever for requiring British companies to prove origin, so there need not be any rules of origin.

The interesting thing though is that, in respect of tariffs, Jenkin is exactly describing a customs union – the abolition of tariffs, a common external tariff and a waiver on rules of origin. However, bearing in mind that on Brexit the EU treaties cease to apply, we will need to agree a new treaty, in the form of a customs union, to give a formal shape to this agreement.

Some people ask why such an agreement can't be rolled up into the Article 50 settlement, but of course this cannot be the case as this is not a treaty. For there to be a customs union, there has to be a formal treaty, with all the provisions which go with it, including dispute procedures and the rest.

Matters regarding interpretation of an interim agreement, says Mr Jenkin, must be settled via an independent tribunal, as is the case with any international agreement or treaty, not by the European Court of Justice.

That said, if we use the 1995 Turkish-EU Agreement, the so-called Ankara Agreement, as a template, it should not be too problematical to finalise a legal framework in time for Brexit day. Whether it can be implemented by then is another matter.

As to non-tariff barriers, and in particular product regulation and standards, Jenkin is silent on the issue of what entry requirements we will impose on third countries. If, unilaterally, we are adopting mutual recognition on goods from the EU we will, under WTO non-discrimination rules, be required to apply this system to imports from all other WTO members.

Therein, I have a feeling we might experience a few problems with the EU. In the first instance, it is most certainly the case that it will not accept mutual recognition as the basis for acceptance of UK products. This simply is not going to happen.

Nevertheless – if they think that the EU is going to dismantle its entire regulatory system, as it applies to import of goods, giving the UK the special concession of mutual recognition, it seems as if Dowd and now Jenkin have been at the Kool Aid. But if the UK then imports third country goods without ensuring conformity with EU regulations, then this will create chaos at the EU borders, as checks are made to ensure none of this material gets into the Single Market area.

The reality, of course is that, interim period or not, when the UK leaves the EU, it becomes a "third country", whence the full regime of border controls will automatically apply. Even when we have finalised a free trade agreement (if that is the eventual intention), then border controls will still apply, with whatever simplifications and derogations the UK is able to negotiate.

With the time available, it is very hard to see how the UK and the EU together will be able to find the time to go through the specific procedures applicable to each sector, to draw up special agreements to afford easy passage to UK goods.

Things like pharmaceuticals, chemicals, vehicle and aircraft components, and the vast range of manufactured goods, all have their own rules and, where applicable, there are rules for conformity assessment. Just getting mutual recognition agreements on conformity assessment will be a major task in its own right.

To Mr Jenkin though, his "broad proposals" are both an olive branch and a challenge to the EU to respond constructively. If there is disruption, he says, it would be because Europe wants it, not the UK. On that basis, we can put to the EU an utterly mad scheme and if the EU rejects it, it is their fault not ours.

To give an indication of the mad world by Mr Jenkin, he then refers to the WTO trade facilitation agreement, which came into force this year. The EU, he says, must comply with this, obliging it to "expedite the movement, release and clearance of goods".

What this man clearly understand is that the agreement is not a set of actionable rules, but a framework within which WTO members must work when setting up customs cooperation agreements with their trading partners.

For developed countries, this is largely ow more than what is already good practice, but the existence of the agreement will have no impact on the time taken for the UK and the EU to finalise a comprehensive customs agreement. This, with the best will in the world, will take years.

With that, Mr Jenkin tells us that the objective of any interim transition period "must be to end uncertainty on all sides, not just to prolong it". Thus, he says, the Article 50 agreement must set out what is intended at the end of the interim period - the so-called future framework. The simplest solution, says Jenkin, is for UK and the EU to notify the WTO that we intend to conclude a free-trade agreement.

But then, what is a free trade agreement? These can range from a modest agreement taking up no more than a hundred pages or so, to the blockbuster edition agreed with Ukraine, which runs to over 2,000 pages. For us to specify in detail what we intend to conclude, we should by now have completed a detailed scoping exercise, with the production of a comprehensive working draft, setting out the issues targeted for inclusion.

Nothing of that has so far been undertaken, which means that any interim agreement is, necessarily, bridging a gap of unknowable width. This is for the UK to fill, and another area where David Davis has been unaccountably lax.

For Mr Jenkin, though, it is for the EU to make the moves. It is a mantra of the EU, he reminds us, that nothing is agreed until everything is agreed. In his view, therefore, it is for the EU to set aside its "artificial refusal to discuss anything except citizenship until the UK agrees how much to pay on exit". Why, he asks, "should we pay anything unless there is a reasonable deal?"

At least he is accepting the principle that something must be paid but, for the rest, he is in Dowd territory, playing silly games with regulatory requirements and then expecting the EU to conform.

Already, our own Anthony Schofield, in a Futurus Briefing is predicting the negotiations will fail. Even if it was not for the mishandling by the UK government, if we were to listen to the Dowd/Jenkin nostrums, they would still fail.

Says Schofield, accepting the need for a transitional arrangement still does not clear up the need for an aim, plan and timetable. Quite often, the UK media has represented some Tory politicians agreeing with other Tory politicians as a step forward in the negotiations but the real negotiations have hardly begun.

And, as long as there are politicians such as Jenkin around to muddy the water, we are not going to get very much further down the road.

Richard North 20/08/2017 link

Brexit: IEA fantasy corner

Saturday 19 August 2017  

What immediately strikes one is the poverty of the debate, typified by the narrowness of the source list and the superficiality of the argument.

Professor Dowd, for instance, wants us to accept from him the proposition that his new, heavenly post-Brexit Britain would make a "market-friendly Global Free Trade Agreement" with like-minded countries, the key elements of which would be minimal trade barriers, strong property rights, reduced regulation, openness to foreign investment and greater freedom of movement.

The call for greater freedom of movement might come as a shock to some of the supporters of the Institute of Economic Affairs, for whom Kevin Dowd has written his paper, entitled, "A trade policy for a Brexited Britain", but nonetheless it is one of his objectives.

But the crucial issue to which I would direct attention is his assertion that: "There would also be a shift away from regulatory harmonisation (as in the TPP and TTIP) towards the use of 'mutual recognition agreements' that acknowledge differences between different countries’ regulatory systems rather than attempt to steamroll over them".

Now, the point here is that the role of mutual recognition agreements is a major, contentious and complex matter, that has over time (many years) concerned many true scholars, who have explored the subject at depth.

This one in particular comes to mind – 37 pages long under the title Mutual Recognition in Goods and Services – an Economic Perspective. Written by Jacques Pelkmans and published by the European Network of European Economic Policy Research Institutes, it is nearly twice the length (and much more so in word count) than Dowd's 20-page effort.

There are other papers dealing with the subject, such as this one a 2016 paper by Shintaro Hamanaka and Sufian Jusoh for the Institute of Developing Economies, embracing the title: "The Emerging ASEAN Approach to Mutual Recognition – A Comparison with Europe, Trans-Tasman and North America", this is a mere 23 densely-printed pages.

The sheer range of papers that one can find, and their diversity, suggests a vibrant, extensive debate where one is not surprised to find a variety of opinions and different views as to the utility of mutual recognition in international trade. But, to the likes of Dowd, mutual recognition is a done deal, the preferred mechanism for regulation between nations, replacing all others and in particular regulatory harmonisation.

To make his case, Dowd devotes less than a full page of his own paper, supported by a lengthy quote from Iain Murray, a staffer from the right-wing US think-tank, the Competitive Enterprise Institute (CEI), who provides him with his one and only citation on the subject, a blogpost from the CEI blog dated 23 January 2017.

Far be it for me to decry the use of a blog to make a point, one nonetheless looks askance at this being offered as the primary (and sole) reference to support the adoption of a specific and complex policy in what is supposed to be a serious research paper from a prestigious London think-tank – still the flagship of UK right-wing Conservative thinking.

Then, this isn't a serious paper and the IEA, once the flag-bearer for Thatcherism, has long since seen better days, and now survives on the fringes, churning out unreadable (and largely unread) tracts covering arcane points on regulation and healthcare, for a diminishing audience.

As to mutual recognition, this is not an alternative to regulatory harmonisation, but a complement to it. Furthermore, it is relied upon extensively by the European Union to the extent that, says the Pelkmans paper, nearly 50 percent of intra-EU goods trade is subject to it.

That actually makes mutual recognition the primary mechanism of regulation applying to the flow of goods between EU Member States, as our own Government acknowledges. As such, it is the major tool for facilitating the free movement of goods within the Single Market – something we will probably lose when we drop out of that Single Market, hugely complicating our trade relationship.

So valuable is the mechanism that the EU has probably exploited it to the full extent of its current utility. As Pelkmans points out, there are important limitations to its use. In such cases, regulatory harmonisation, amongst other mechanisms, is seen as the better option.

And this illustrates what I mean by the poverty of the debate. In the space of less than a page, Dowd turns a complex and important issue into a black-and-white pastiche, presenting it as a binary choice between two competing mechanism, citing a single, right-wing think-tank as his source. That is what, for the IEA, passes as its idea of a grown-up debate.

Dowd himself is a professor of finance and economics at Durham University, a prestigious, long-standing university. But, although he is a member of the lobby group, Economists for Free Trade, he is not a trade expert. He writes extensively on the history and theory of free banking, the mechanics of monetary systems without the state and the failings of central banking and financial regulation.

But he is also a senior fellow of the Cobden Centre, tying him into the right-wing free trade network dominated by the Legatum Institute and their sinister agenda.

In this specialism, therefore, he is just another polemicist, writing outside his area of expertise, relying on the "prestige" of his university and the tarnished authority of the IEA to project his views. As for his polemic, it has already been quite widely trashed, but what is worth looking at is the treatment of the paper in the media.

Here, one observes in passing that few newspapers these days would freely publish a paper written on, say, eugenics, indicating that there is still left some degree of editorial discretion. But this, it seems, does not apply to the partisan, inadequate scholarship promoted by the IEA in favour of the tired and potentially damaging concept of unilateral free trade.

Thus in yesterday's Telegraph we see an article by Jamie White, Director of Research for the IEA, given over to supporting Dowd. But White's opening argument is positively childish, displaying not the slightest grasp of the subject.

In this he starts by asserting that we do not need to negotiate a trade deal with the EU in order to trade freely with the Member States after Brexit. Free trade, he says, "does not require trade deals between governments", then continuing:
People living in Leeds can now trade freely with people living in Bristol. Yet there is no trade deal between the Leeds City Council and Bristol City Council. Suppose councillors decided to take an interest in trade between the two cities and struck a deal. The terms of the deal could only create barriers to trade where there were none. The same goes for international trade. If governments genuinely sought free trade, there would be nothing to negotiate. Each would simply refrain from creating any barriers to trade. This is precisely what the UK should when it leaves the customs union in March 2018.
What this bizarre example ignores is that the people in Leeds can trade freely with those in Bristol because the UK is a single market - a common regulatory area with common standards – precisely the situation the EU had been seeking to achieve with its 28 Member States.

We have achieved this status because the UK has a central government which has progressively removed internal barriers to trade, including the dozens of different weights and measures systems which, in antiquity, had different measurements for the bushel in virtually every region.

As far as international trade goes, barriers to trade emerge spontaneously as sovereign governments impose tariffs and also legislate locally and differently for their own territories, over a wide range of issues. This is even recognised by Dowd, who declares in his paper:
Nowadays achieving free trade isn't so much about tariffs or classic bread and-butter trade policies; it is about regulation and the general degree of economic freedom. Many restrictions to genuine free trade arise from current regulations in areas such as the environment, consumer protection, health and safety, and data security. These regulatory restrictions are pervasive and constitute barriers to free trade that are at least as important as the barriers created from trade policy.
Thus, the purpose of a trade deal is to remove external (i.e., international) barriers to trade – including differences in regulation - by which means we can expand the domestic market and benefit from economies of scale and from the advantages of specialisation.

But since we will have no jurisdiction over other countries' territories with whom we wish to trade (having left the EU, where we shared jurisdiction over each other's), we have to negotiate regulatory parity or other mechanisms, such as mutual recognition, in order to remove barriers - hence trade deals.

The idea that we do not need trade deals with other countries, therefore, is absurd. It is based on a childishly facile argument that does not stand one moment's scrutiny.

This brings us back to where we started. Dowd wants unilateral free trade with the EU (the Minford stupidity), which will deal with tariffs (he hopes), but for regulation, he wants our Government to "commit to zero barriers on imports" and invite the EU to make "comparable commitments".

His idea of "zero barriers" is to adopt universally the mechanism of mutual recognition, using the Trans-Tasman Mutual Recognition Arrangement (TTMRA) as a model, apparently unaware that it has major areas of exemption and limitations.

Further, what can apply between two countries which share the same language, the same basic legal system and are at similar levels of development, will not apply to countries which have major differences between them.

Then, in the event that there is no trade deal with the EU, "the default position should be that a Brexited Britain would continue to trade with EU on the same tariff-free basis as it presently does". He adds: "The UK does not need a trade deal with the EU and the UK should be willing to walk from any bad trade deal". In this, he tells us, "imposing tariffs on imports from the UK would be a major act of self-harm".

So, according to the Dowd plan, we allow in all goods from the EU on a tariff free basis and automatically recognise their regulation, accepting goods (and services) without hindrance.

We then invite the EU to drop all its tariffs against us, despite WTO rules requiring it to impose its CET on all MFN partners, while expecting it to waive all its regulatory requirements – applicable to all other nations in the world – and apply mutual recognition to whatever regulations we may or may not impose on our domestic market.

This is not intelligent scholarship. It is a childish fantasy which has no basis at all in reality. And it represents the final departure of the IEA from the stage, consigning it to the margins of a debate it never really understood and from which it is quite evidently incapable of learning.

As for the Telegraph, it long ago ceased to be a sensible newspaper and has now become the "Ultra" comic. It and the IEA deserve each other.

Richard North 19/08/2017 link

Brexit: another fine mess

Friday 18 August 2017  

Not for the first time, and doubtless not the last, I'm having to point out that the conclusions we came to in Flexcit were not arbitrary. In particular, the "Norway" (aka Efta/EEA) option became our choice not for its specific merits but after eliminating the less favourable alternatives.

There was a brief period when it became fashionable to list as many variations and sub-variations as possible but, in truth, there were only ever three: the unilateral (WTO), bilateral (Swiss) and the multilateral (Norway) options.

The great advantage of our choice – which makes it the least-worst option – was (is) that the systems and infrastructure already exist. That gave us something that could at least be implemented within the two-year time span afforded by Article 50, buying us time for a longer-term solution.

In fourteen months or so since the referendum, it looks as if our Government has been going through the same process, eliminating choices one by one until it ends up with what it believes to be the only available option.

Interestingly, when the Treasury published its evaluation in April 2016, it came to roughly same conclusion that we did. The net impact on tax receipts, it concluded, would be £20 billion a year in the central case of the EEA, £36 billion a year in the case of the negotiated bilateral agreement, and £45 billion a year in the case of the WTO. By that measure, the EEA was the "least worst" scenario.

What we have seen from the last two days, though – with the publication of the first two "partnership papers" – is that the Government has come to a different conclusion. At least, it is now favouring a different outcome, opting for a messy series of bilateral deals, roughly following the Swiss model.

We are not privy to the Government thinking on this matter – assuming that "thinking" is one of the processes involved – but it seems to have come to this different conclusion by employing a different filter.

While we chose practicality – i.e., that which was practically possible – the government test seems to have been one of political acceptability, defined in terms of notional "red lines". For entirely political reasons, which have a lot to do with internal Conservative Party politics, it has rejected the Efta/EEA option.

Having then been forced to walk away from the idea of relying on the WTO (also known as the "no deal" option) on the grounds of practicability, that has left it with nowhere to go other than the messy compromise of seeking multiple bilateral deals to cover the territory.

Then, because the Government has quite evidently concluded that these deals cannot be finalised within the two years allowed, it is talking of a transitional or "interim" deal, despite not having the first idea of how to go about achieving one.

As for the end game – the longer-term solution - this exists in name only, the fabulous, all-singing, all-dancing "bold and comprehensive trade agreement", the like of which no man's eyes have ever seen (or probably will see). Despite its pivotal importance, the Government has not seen fit to publish any details – or even tell the European Union what it wants.

This is a mad situation. There is no other way of putting it. We have a government that has rejected – by its own estimation – the least-worst option, in favour of a less attractive scenario, and one that it can't possibly deliver. It is doing so in order to buy time for an end game that it has not defined and is now arguing for an "interim" deal that is almost certainly unattainable.

Still though, the chatterati don't understand. We've long given up on the media, academia (if we're allowed to generalise) has lost the plot and the think-tanks are engaged in the detailed exploration of their lower intestinal tracts – without the aid of equipment.

Latest in a long line of dereliction is the Institute of Government, which is still talking of a "single market and a customs union arrangement" as if it was an option worth considering.

If endless platitudes were the answer to our problems, then the IoG would be our saviour, but it offers the idea of Single Market as the option that would lead to the least impact on supply chains, putting us back to where the Treasury report was in April 2016, with the EEA as the least-worst option.

Beyond this fictional "bold and comprehensive" free trade agreement, for which there is no substance, no draft on the table, or even a scoping report to work with, no one seems to have the faintest idea of what Brexit really looks like. Apart from the ideas set out in Flexcit, there is not the slightest attempt to address the end game in any realistic sense.

All we have to go on therefore, is the Commission pouring cold water on the UK Government's ideas, insisting that its "phase one" housekeeping matters take precedence over the aspirations published in the last few days.

Meanwhile, as Mr Barnier keeps telling us, the clock is ticking, and will keep ticking. This is ironic, in a sense, given that Big Ben has lost its "bong", but then life relies on such symbols to send us a message.

The trouble is that, there are only the platitudes left. The Government has managed to make such a mess of Brexit that there is no obvious (or any) way forward. To keep the conversation going, we must keep churning out more and more extruded verbal material, with meaning long departed.

Right from the beginning, of all the short- to medium-term options, Efta/EEA was not only the best but the only way forward. We offered as a fall-back, the "shadow EEA" which, while less acceptable, could have at least been workable, had we sought from the very beginning to put our resources behind such a plan.

But, as we see time is dribbling away, with the media talking of only ten months being left for trade talks – assuming the "housekeeping" issues can be resolved.

Not only can't we do a trade deal in that time, we could not even produce a working draft of a transitional deal within that period. Already, we have run out of time, and there is no turning back.

The real test for analysts, therefore, is to identify the point at which business will wake up to the coming disaster and start bailing out. Every now and again, we see reports of businesses preparing contingency plans – led by the banks – but there must soon be a realisation that Government is set to deliver only chaos.

There are, however, concerns for small- and medium-sized businesses that may not have the capacity to conduct detailed contingency planning, but these will have to go down with the ship like the rest of us. But the "big boys" will jump ship, leaving only skeleton crews behind.

That may just be sufficient to jolt the Government into taking emergency action, although such is the air of unreality in Whitehall that even with the "rats" pouring down the sides of the ship, the likes of Mr Davis will be reassuring us that everything is under control.

Whitehall, however, looks to be in the final stages of a Laurel and Hardy comedy film, where we all await the predictable punch line that everybody but the actors must know is coming. But this is not comedy - it's tragedy played out on a vast scale. The results are not going to be pretty.

Richard North 18/08/2017 link

Brexit: no solution at all

Thursday 17 August 2017  

One of the great lies perpetrated by remainers and "Ultras" alike is the claim that pursuing the "Norway" (Efta/EEA) option would require us (the UK) to continue obeying EU laws, with "no say" in their creation. That never was true, even within the constraints of the EEA institutional arrangements, but it doesn't stop those opposed to a "soft" Brexit trotting it out at every opportunity.

With no doubt unintended irony, however, it is exactly that scenario which the Government is proposing in its latest "position paper", this one on the Irish border, in respect of cross-border movement of animals and foodstuffs.

So desperate is the Government to avoid a hard border in relation to checks on particular types of goods, those it terms "Sanitary and Phytosanitary (SPS) measures for agri-food" that it is suggesting that the EU allows us to adopt the "Swiss option", which "could ensure that there would be no requirement for any SPS or related checks for agri-food products at the border between Northern Ireland and Ireland".

You have to look quite carefully for the Swiss reference as it is confined to a footnote – the one exception outside the EEA where routine border checks on these products have been all but eliminated.

But the price paid for this "freedom" is one which the "Ultras" are seriously not going to like – and nor it is going to be without complications. Firstly, as with Switzerland and the EU, the UK will have to be defined as a "common veterinary area" for the purposes of disease control.

This though rests on a comprehensive EU-Swiss treaty known as the Agriculture Agreement which includes 11 Appendices covering 37 pages on animal health matters, bringing Swiss law into line with the lengthy list of EU legislation.

This agreement also creates a Joint Veterinary Committee between the EU and Switzerland which has the authority to frame joint "acts" binding the parties, one purpose of which, as illustrated here is to keep Swiss law updated and in line with EU provisions.

This is not simply a question of "equivalence", as the UK Government would like it to be, but more-or-less complete harmonisation of law, systems and procedures, with the EU setting the agenda.

Sanitary and Phytosanitary agreements between the EU and third countries are by no means unusual, with the Commission website thirteen such, of which the Swiss agreement is clearly the most comprehensive. Mostly, such agreements are either free-standing treaties (as with the Swiss) or built into broader free trade agreements. Special "simplified procedures" apply to Efta/EEA states.

To ensure effective collaboration between Switzerland and the EU in the event of the detection of a listed animal disease, Switzerland is fully linked via a computerized network to the veterinary authorities of the European Commission and individual Member States of the EU through the Trade Network and Expert System (TRACES) and the Animal Disease Notification System (ADNS). Furthermore, Switzerland participates in different working groups and meetings of the Standing Committee on the Food Chain and Animal Health (SCFCAH).

All this could be replicated to form an agreement between the UK and the EU, with the added proviso (also built into the Swiss agreement), that any agri-food products entering into the UK from other third countries has to be subject to the same import regime as applied by EU member states to similar products entering their territories.

This would include the provision of Border Inspection Posts and the diversion of imports to them before they were submitted to customs clearance. Any goods coming into to Ireland with a final destination in the UK or an EU Member State must be inspected by the Irish authorities at a BIP (or other approved location). The combined effect of this regime would be to rule out independent trade deals in the agri-food sector with other third countries, where more relaxed or different standards were applied.

As far as agri-food products go, this would certainly give us the "invisible border" that the UK Government so much wants. What is not going to happen though, is the EU exempting traders and farmers from checks – as the Guardian avers.

The UK will have to maintain the full spectrum of internal checks, and paperwork, applying EU law to its fullest extent. But the effect would be that, in respect of this major sector, the UK would gain no relief from Brexit. To all intents and purposes, it will not have left the EU.

As to whether this would political tenable in the UK remains to be seen but it would quite obviously contradict any claim to us having regained control over our laws.

One possible advantage though is that, in the Swiss agreement, there is no judicial element in relation to dispute settlement. The Joint Committee acts as an informal arbitration body. Failing that, there is always the WTO dispute settlement procedure. Thus, there is no problem with ECJ jurisdiction.

Whether the EU would allow the same informal approach to apply in an agreement with the UK also remains to be seen. If it wanted more, then this could become a sticking point. That aside, a comprehensive sanitary and phytosanitary agreement (whether or not part of a more general agricultural agreement) would be a complex and time-consuming thing to negotiate.

Now that the UK has tentatively put it on the table, by way of its position paper, it is open for the parties (the EU and the UK) to place it firmly on the agenda. However, Barnier has already made it clear that he is keeping to the sequencing outlined in his negotiation mandate, so it is unlikely that we could see talks on this complex subject start until the end of the year, if not later.

Then to conclude an agreement before Brexit day would be possible, given that our laws and systems are already fully integrated with the EU- provided there are no unexpected glitches. The key though is whether the parties can find a slot in what will be an increasingly crowded agenda. The sheer volume of issues to be negotiated is going to make that difficult.

And that is just one small part of the whole, which will have to go to making the Irish border "invisible". All the other sectors, from aviation to chemicals, pharmaceuticals and engineering, each with their own specific regulatory requirements, will require their own agreements, on top of broad-ranging mutual recognition agreements on conformity assessment.

At least, though, for these position papers, the UK government is beginning to think in concrete terms about what is necessary to secure a working settlement with the EU. But, as it does so, the complications multiply rather than fade away while, as Mr Barnier keeps reminding us, the clock keeps on ticking.

Many of the problems, of course, would melt away should the UK – even at this late hour – adopt the Efta/EEA option – which offers a far better deal than the UK is seeking through its position paper. This is a bizarre example of negotiators turning down an option only to go for something less advantageous.

And even then there are countless other issues which need to be addressed, with the Irish Times recording that IT experts are dismissing the idea of a frictionless border altogether.

When push comes to shove, the border will form the EU's external border and the EU is not going to allow Northern Ireland to become a "back door" into the single market. With agri-foods as the model, that could see the Irish tail wagging the British dog, with the UK having to erect barriers at the borders between itself and third countries in order to preserve free movement across the Irish border.

And on that basis, the Irish solution that we have seen outlined yesterday could end up being no solution at all.

Richard North 17/08/2017 link

Brexit: fantasy island

Wednesday 16 August 2017  

Of the same order of error as the girlies in the Telegraph who referred to Spitfires as "jets" (later corrected), we have a government which yesterday produced a "future partnership paper" demonstrating that they don't understand the difference between a customs union and a customs agreement.

This ignorance is shared with the bulk of the media, which wantonly parades its own lack of comprehension, muddying the waters and confusing its own readers – and the politicians amongst them. But then I suppose it's really too much to ask of these simpletons to take on board the simple fact that that a customs union is primarily about removing tariffs between members and has nothing to do with the erection and maintenance of border posts, and border checks by customs (and other) officials.

After all the time spent, such making such distinctions is totally beyond the ability of this whole range of people. Forever, they are locked into an entry-level pastiche which should not, if there was any justice get them through their GCSEs. We are doomed to a debate dominated by infants.

The trouble is that when these uncomprehending infants are in government – some of them senior ministers – and they are tasked with writing policy papers, it matters. We cannot progress to sensible positions if those we rely upon have no grasp of the basics. We might just as well do a round robin of a sample of primary schools, for all the sense we will get.

But there it is – starting with the executive summary, we get the classic non-sequitur which betrays the uncomprehending minds: "As we leave the European Union and therefore the EU Customs Union, the Government seeks a new customs arrangement that facilitates the freest and most frictionless trade possible in goods between the UK and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world".

This is tosh – unmitigated, crass stupidity – implying as it does (and fully amplified elsewhere) that membership of the EU Customs Union was the facilitator of free and "frictionless" trade. Specifically, we learn (para 21) that: "Membership of the EU Customs Union means that goods moving between the UK and other EU Member States are not subject to customs duty, quotas or routine customs processes (including the need to provide customs declarations).

From that, it would follow that replacing the customs union would restore our trading relations to the pre-exit level. However, having started off from a false premise, the paper then goes on to talk about "a future customs relationship with the EU" that actually goes way beyond a customs union. In effect, it is talking (without declaring this to be the case) about replacing some or all of the Single Market provisions.

Interestingly, throughout the entire document, there is no mention of the Single Market – not one reference. The term "Single Market" has been completely erased from the script, despite its presence dominating the entire publication – the spectre at the feast.

In order to achieve what amounts to Single Market equivalence, however, the paper suggests two routes:
  • A highly streamlined customs arrangement between the UK and the EU, streamlining and simplifying requirements, leaving as few additional requirements on UK-EU trade as possible. This would aim to: continue some of the existing agreements between the UK and the EU; put in place new negotiated and unilateral facilitations to reduce and remove barriers to trade; and implement technology-based solutions to make it easier to comply with customs procedures. 
  • A new customs partnership with the EU, aligning our approach to the customs border in a way that removes the need for a UK-EU customs border. One potential approach would involve the UK mirroring the EU's requirements for imports from the rest of the world where their final destination is the EU. 
Slipping down the document to the detail (such that it is), we then find the claim that the "streamlined customs arrangement" is based on the UK and the EU trading with each other essentially as third parties. This is a feline way of denying the obvious – that the EU is the "first party" and we are the "third country".

In the entire paper, though, there are only three references to "third country" and none of them acknowledge that this becomes the UK status. Instead, it seeks to position the UK and the EU as equals, which is manifestly not the case.

The UK view of its "third country" status, however, is at its most bizarre when it considers a scenario "without any further facilitations or agreements – in other words, a "no deal" scenario. Then, it has the UK treating trade with the EU as it currently treats trade with non-EU countries, while the EU would also apply the customs rules and VAT to imports from the UK that it applies to non-EU countries.

In effect, therefore, the Government seem to think that "third country" status only applies in the event of us failing to reach a trade agreement – that somehow the inevitable consequences of leaving the EU and the EEA can be mitigated.

With it labouring under this false impression, we are told that: "The Government believes that the UK and the EU should also jointly consider innovative approaches that could support UK-EU trade outside of a customs union arrangement, while still removing the need for customs processes at the border".

The last clause is the give-away. The UK Government is seeking the restoration of Single Market privileges. That is what the Single Market does – it removes the need for customs processes at the border. And that isn't going to happen. The UK will be a third country and it will be treated as a third country.

Similarly, the second option, the "new customs partnership with the EU" isn't going to work either. Again the suggestion is that we align our approach to the customs border "in a way that removes the need for a UK-EU customs border".

That simply is not sufficient for the EU to remove its border controls. Look at the Blue Guide. With leaving the EU and the EEA, we lose free movement of goods. Our products will no longer be permitted free access. Instead, they must be routed via an importer, "a natural or legal person established in the Union who places a product from a third country on the EU market".

The prospect of our aligning our approach is, in any event, not one which is going to go down well with the "Ultras" as it involves the UK mirroring the EU's requirements for imports from the rest of the world where their final destination is the EU. In other words, for import purposes, we become a regulatory satellite of the EU.

With that, sneaked into the paper is a short comment (para 24) which tells us that customs is only one of the ways in which we control the movement of goods across borders. Achieving UK objectives in full, therefore, "will depend on other elements of the deep and special partnership and trading arrangements we secure with the EU". For details on these, we are going to have to wait.

Nevertheless, nothing confronts the basic flaw here - the assumption that conformity with EU customs procedures is going to be sufficient for the EU to dismantle its border controls. It won't be enough, and the Government should know this. The UK will still be treated as a third country, and the full range of import provisions will be applied by the EU.

That notwithstanding, no deal will be settled by 29 March 2019, leaving the Government to look at the need to "avoid any cliff-edge as we move from our current relationship to our future partnership". We would, it says, "benefit from an interim period, for the implementation of the arrangements, that allowed for a smooth and orderly transition".

Here, its preferred model for an interim period is a "new customs relationship" which "could be delivered through a continued close association with the EU Customs Union for a time-limited period after the UK has left the EU". This, we are told, "could involve a new and time-limited customs union between the UK and the EU Customs Union, based on a shared external tariff and without customs processes and duties between the UK and the EU".

And this is where the "girlie mistake" has its effect. A "new and time-limited customs union", even if the EU was prepared to agree one, would not deal with the "customs processes … between the UK and the EU". With only a customs union agreed, the full gamut of controls would take effect from Brexit day onwards.

Thus, on the matter of customs arrangements, if this is all the Government has to offer, we are in very serious trouble. We are being taken on a one-way trip to fantasy island, where Mr Davis and his friends are pushing for scenarios which cannot happen and have already been ruled out by the EU, or which do not satisfy our needs.

It would help, our course, if we had any clarity from the opposition, but there is none to be had. In the New Statesman we have Labour's Chris Leslie airing his views, telling us:
The government's position paper seems to be pretending that these benefits can be retained despite leaving the customs union. They say that they are seeking to achieve "the most frictionless customs arrangement anywhere in the world". Well, Britain is already a part of that, and it is called the customs union. The idea that Britain can leave that organisation, negotiate the exact same benefits as membership, and then go around negotiating new trade deals with other countries, is just nonsense.
What is it, we wonder, about the EU that turns politicians' brains to mush, alongside their handmaidens in the media.

Leslie slightly redeems himself by saying that "the only way to preserve free and frictionless trade with the European Union is continued membership of the customs union, as well as the single market". If he forgot the obsession with the customs union, and went for the single market, with a tariff-free deal, he'd be a lot closer.

In fact, all he has to do is look at Article 10 of the EEA Agreement, which states: "Customs duties on imports and exports, and any charges having equivalent effect, shall be prohibited between the Contracting Parties".

Every which way you look – except the direction the Government is looking – continued EEA membership provides the answer. But, unable to live with the real world, we find our politicians retreating to their fantasies.

The last word comes from a formal EU statement, which rejects this attempted to convey that future trade can remain unchanged after to leave. "As Michel Barnier has said on several occasions, 'frictionless trade' is not possible outside the single market and customs union", the statement says.

But they will not be told – and this paper brings yet another illustration of how far from reality we have strayed.

Richard North 16/08/2017 link

Brexit: on the brink

Tuesday 15 August 2017  

So far, the only thing that has stopped us from completely disowning the government's Brexit policy is the lack of detail. Although we have our dark suspicions, no one can be absolutely sure what its policy is. But, with the imminent publication of a dozen or so "position papers", this looks set to change.

Already, there have been a number of limited leaks, but nothing firm enough to be definitive. What we see, though, does not bode well. It appears the Government is about to commit openly to a series of proposals so devastatingly unrealistic that they don't have any chance of making it alive into the real world.

Already, we see from diverse rumours of the paper on the Irish border question which is going to have the Irish government vehemently opposed to the UK's plans and ready to veto everything in sight unless Mr Davis can come up with something better.

Sometime today, though, we expect to see a proposal for transitional arrangements on customs which, according to the Independent, will seek continued alignment with EU customs rules for an "interim period" after Brexit.

This, the paper has it, is Ministers telling Brussels they want a "temporary customs union", so that "little would change on the ground" in terms of trading with EU Member States. Apparently though, there is "absolutely no detail about how such a miraculous new system will be achieved".

In the first instance, if the Government is perpetuating the confusion between a customs union and the Single Market (something which even the Commission managed to do yesterday), then it will be in real trouble, expecting "frictionless trade" just by eliminating tariffs.

But equally problematical is that, to settle on a post-Brexit customs union with the EU will require a separate treaty. However, since trade is an exclusive EU competence, the deal can be made between the Commission and the UK, but it must be formally agreed by the Council (under QMV) and the European Parliament.

Keeping an agreement just a customs union level, though, will do little to smooth the passage of UK goods into EU Member State territories (or the EEA for that matter), and even then it remains to be seen whether the EU will commit the resources to agreeing a customs union with the UK for a temporary period that may be no longer than two years. And, of course, the UK cannot require the EU to agree. If it says "no", that is the end of the matter.

On the other hand, if a treaty is to go further, covering aspects of the single market, it could end up being a mixed agreement, with all that that entails in terms of unanimity and ratification. Any one country – such as Ireland – could block an agreement, either at signing or ratification stage.

For "frictionless trade", though, any treaty would have to go massively further than a mere customs union, as the Turks are well aware. They have a customs union with the EU and delays at the Kapikule Border Gate are routine and can extend to several days for vehicles waiting to cross.

As to the longer-term arrangements, the Guardian has it that the government is examining two options.

We are either to have a highly streamlined new arrangement "in which the UK would manage a new customs border" but would seek to make any checks minimal; or a new customs partnership, which would see Britain replicate the EU's approach so closely that it would "negate the need for a customs border".

The former, if the EU agreed, would require considerable organisation and expenditure on infrastructure, with the appointment of thousands of additional officials. How far it could progress would be up to the EU to decide, and it is unlikely that customs controls on the EU side would be completely waived. Then, there are the veterinary and other sanitary checks, which need special provision.

As to the second option, this seems to perpetuate the myth that all the UK has to do is maintain regulatory convergence and goods will flow freely. From all appearances, there continues to be this total blindness as to the consequences of the UK leaving the EU and assuming "third country" status.

Then, there is the massive issue of the continuation of the trade deals with other third countries, where the EU's approval will be needed before they can be allowed to continue. Continuity can be sought, but it is by no means automatic.

Predictably, before they have even been published, the position papers are taking a hammering from the opposition. Keir Starmer says they are "incoherent and inadequate proposals designed to gloss over deep and continuing divisions within the cabinet". But then, he would say that, wouldn't he.

Returning to the Irish, Sinn Féin and SDLP describe them as "unworkable" and "back-of-envelope", although we will have to wait until Wednesday before the full horror becomes visible.

Nevertheless, SDLP Leader Colum Eastwood is dismissive of some of the expected content of the paper. "Advance leaks indicate that Theresa May's government intends to stubbornly stick by its hard Brexit position of leaving the customs union and the single market, threatening a hard border in Ireland", he says.

"Back of the envelope proposals on "very advanced CCTV cameras" at the border don't even enter into the realm of a serious suggestion or a credible solution", he adds. "It is almost laughable that it took the British government over a year to come up with it. Anyone who knows anything about the Irish border knows it's a non-runner".

Without yet seeing any of the detail, though, one gets the impression that we are, as a nation, on the brink. With nearly fourteen months since the referendum, the government is demonstrating that it has learned perilously little and is as far now from a coherent exit plan as it ever was.

But what is even more disturbing is the apparent inability of government ministers to learn anything, or to understand the hurdles they are up against.

Further, bolstered by their Tory fan boys, and the increasingly bizarre statements from back-bench "Ultras", they are demonstrating a lack of understanding of the nature of the EU, leading them to the belief that their completely impracticable ideas will be accepted by the EU.

Eastwood's dismissal may have very much wider application than just the Irish border issue, marking the entire spectrum of Brexit policy proposals our as a "non-runner". From the brink, where we are now, we are about to see the UK tilt over the edge of that cliff, and plummet to economic chaos.

And yet, these people still think they know what they are doing.

Richard North 15/08/2017 link

Brexit: so shall we perish

Monday 14 August 2017  

It doesn't take very much these days to find out the official rules for many things. Most governments are internet savvy and tend to post the details on their websites.

So it is with importing and exporting horses. If you want to know the rules for bringing in a horse from another EU Member States, all you have to do is look here and you'll find them all set out – including details of The Tripartite Agreement (TPA) which applies to racehorses.

If you want to know how imports from non-EU countries are treated, however, you need to look here. For a start, it says: "You can only bring live animals or animal products into the EU from countries on the EU’s approved list". And then there is the requirement to use a Border Inspection Post.

This you might have read on this blog. And that's going to be the situation when we leave the EU. We will be a "non-EU country" and rules which are set out will apply to UK movements.

Rules for the movement of racehorses throughout the world vary widely, but an illustration of how other countries do it can be gained from the US website. So varied and complex are they that the advice given to those planning to transport a horse into or out of the UK is get a professional to do it for you.

That would not apply at the moment to the movement of racehorses to and from Ireland, either from the mainland or across the Northern Ireland border. The bloodstock industries in the UK and Ireland are so closely integrated that they are essentially one. With EU rules and the TPA, cross border movement is very easy.

However, when an Irish government vet raises the alarm about the post-Brexit situation, which I reported on this blog recently, it is perfectly valid for Booker to pick up the story and run its in his own column.

Across the Irish Sea, he writes, they are finally waking up to a disaster looming over the future of one their chief economic sectors, which also has huge implications for Britain.

At last week's Dublin Horse Show, a "Brexit Equine Forum" discussed the consequences for Ireland's horse racing and bloodstock industries of Britain’s decision, by leaving the European Economic Area, to become what the EU calls a "third country".

This, the audience heard, will bring an abrupt end to the arrangement whereby they and their British and French counterparts can, under EU law, move tens of thousands of horses a year freely in and out of each other's countries without hindrance.

As a senior Irish government vet explained, this threatens Ireland's £2 billion a year industry, so closely enmeshed with those of Britain and France, with what he called "an absolute nightmare scenario". Up will go border inspection posts to ensure that any horses entering the EU from Britain must carry an EU health certificate and be subjected to full veterinary inspection. Building new facilities and training staff could not be completed by Britain's exit date.

According to a leading Irish trainer, the new procedures could create delays long enough to make movements impossible under animal health rules. So, no more Irish horses at Cheltenham, and much else.

Booker notes that similar EU rules requiring border inspections posts, vets and delays will severely hamper all traffic of animals and "products of animal origin" across the border with Northern Ireland.

He thus concludes that they may at last in Ireland be waking up to all this. But in Britain there is little sign yet that our own politicians are aware of just what a problem they seem bent on creating.

And in that piece there is nothing particularly contentious. It is largely factual apart from the observation that there will be no "more Irish horses at Cheltenham". That is classic hyperbole, but entirely justified given the massive impact an unmitigated Brexit will have on the Irish industry.

To read the comments on the Telegraph website, though, is to enter a different world, where Booker is a "remoaner" who is "plumbing new scaremongering depths with this absurd dross", or writing "nonsensicle (sic) anti-Brexit articles".

The absolutely classic response, though, was this from John Bowles, who wrote: "I'm not a horse racing expert, or even a fan, but surely horses already travel from Ireland all over the world - Hong Kong, UAE, America and other far flung NON EU destinations. If so then where is there a problem?"

Although we often see the same names, and the number of comments is way down (less than the comments we recorded yesterday), this still represents a significant part of the "leaver" sentiment – the faction that will not accept that there is any down side to Brexit and no problem that cannot be solved either by the EU abandoning its rules, or by the Irish defying Brussels.

If there was a predominating view, it is that for more rigorous rules to apply to the movement of horses would be just an example of Brussels being "bloody minded". The solution, quite obviously, is for the EU not to apply its own rules.

The trouble is that this seems to represent the views of many politicians, many of whom seem to think that EU Member States prize their access to our market so greatly that they will prevail on the EU institutions to waive their rules when it comes to the EU. The belief is that, just prior to exit day, the EU will "cave in" and afford us access to the markets of its members on much the same terms that we have now.

One must hope that our government is able to negotiate a transitional deal that will have the desired effect, otherwise we are going to be in serious trouble. Largely, except where EU legislation itself gives them some flexibility, the EU simply cannot waive its rules. To do so would put it in breach of its own treaties, and would doubtless conflict with WTO rules.

Racehorses, though, are but one issue. There are hundreds if not thousands of similar issues, where export from "third countries" is covered by a myriad of technical rules. Other countries, that have grown up with the EU system, have had decades to attune their systems to EU requirements, so none have had to start from scratch.

For the UK, if it comes to having to agree on this vast range of technical rules, we will be starting from scratch, a process that could hardly be completed in less than a decade. And it is that to which Booker is drawing attention.

If, however, the politicians and a significant faction of the commentariat don't believe this, then we are in serious trouble. They will take us over the cliff edge for the very reason that they don't accept that it exists. Problems are simply inventions of the "remoaners", who are trying to keep us in the EU.

So bad has it got that anyone who even suggests that we may encounter some problems when we do leave is immediately branded a "remoaner", who must then be disbelieved. Add to that inability of the media to see this issue in anything other than binary terms, we end up with "leavers" who think that getting out is easy, and "remoaners" who don't.

Grown-ups would recognise that the position is far more nuanced, and that we have many technical problems which we need to overcome. To ignore them is to ensure that they overcome us. But then, the "leavers" have an answer to that - it's all the fault of the EU for not changing their rules.

And by this stupidity, so shall we perish.

Richard North 14/08/2017 link

Brexit: not even mushroom management

Sunday 13 August 2017  

The Telegraph is at is again, offering another of its meaningless stories – this one on the back of an article written jointly by Philip Hammond and Liam Fox.

With no detail provided, us ignorant plebs are supposed to accept that Britain will not stay in the European Union by the "backdoor" and will completely leave the single market and customs union after Brexit in 2019.

All we are allowed to know is that there will be a "time-limited interim period" designed to "further our national interest and give business greater certainty", thereby ensuring "a smooth and predictable pathway for businesses and citizens alike".

Hammond and Fox thus jointly declare that, during this period, "our borders must continue to operate smoothly; goods bought on the internet must still cross borders; businesses must still be able to supply their customers across the EU and our innovative, world-leading companies must be able to hire the talent they need, including from within the EU".

Then, once this miracle is concluded, they tell us that: "we want a permanent, treaty-based arrangement between the UK and the EU which supports the closest possible relationship with the European Union, retaining close ties of security, trade and commerce".

This is seen as ending the rivalry between different factions in the Cabinet but, if this is all we have to go on, then it provides absolutely no reassurance that the government has got a grip on the Brexit process.

Making grand, sweeping statements about wanting "time-limited interim period" is all very well but, as we have found to our cost, in most dealings with the EU – and especially Brexit – the devil is in the detail. And detail there is none.

In a very real sense, this sort of game is an insult to our intelligence. Even the meanest of us can readily see that a declaration that is long on aspiration but entirely devoid of the means of delivery is just hot air. That these people should think that we'd be at all impressed it is a further insult. They must think we are incredibly stupid (or gullible) if they expect us to be satisfied with this.

What this article does tell us though is that there is now a degree of agreement at Cabinet level on the need for an interim period. With that comes the tacit acknowledgement that a full exit settlement cannot be concluded within the two-year Article 50 period.

This is something that was obvious right from the moment we started looking at the implications of Article 50, so all we seen to have achieved is a recognition of something that should have been a working proposition from the moment Theresa May took office.

How an interim deal can work, though, is not at all clear. If it is to be binding between the parties, any agreement will – by definition under international law - be a bilateral treaty between the UK and the EU-27. There can be no getting past this. A binding agreement between parties, creating obligations under international law, is a treaty – no matter what it is called.

Then, to be effective, this new treaty must cover most of the moving parts of the existing EU treaties, and will have to provisions for surveillance, complaint handling and formal dispute resolution.

If the agreement is not binding (as in a memorandum of understanding or an exchange of letters) then it will not be enforceable. There will be no way that the UK can insist that the Member States follow any lead given by the EU institutions, making it a recipe for chaos.

We are, therefore, looking at a secession treaty, the very thing to which we have been referring for some time. And that is not going to be easy to frame, possibly taking up all the time remaining before we drop out of the EU treaties.

Technically, of course, that will mean that we are out of the EU, although we will end up in a treaty relationship with the EU which, logic would suggest, will be very little different from current arrangements. The more differences there are, the longer negotiations will take, and the greater chance there will be for a breakdown in the talks.

By its nature, this treaty (unlike the Article 50 settlement) will have to be agreed unanimously, and ratification will be required. There remains the possibility of a UK referendum and we cannot rule out other member states putting the treaty to a plebiscite. Not only is there then the possibility that it will be rejected – the time taken may mean that the treaty cannot be in force by the time we leave. It could, however, be provisionally applied.

One must also conclude that, if the bulk of the remaining negotiation time is given over to a secession treaty, this "kicks the can" of the longer term comprehensive trade agreement much further down the road. But it will also relieve us of the "tyranny of the deadline", with the possibility that a decade or more will elapse before matters are concluded.

In the interim – as long as the EU can be prevailed upon to play ball (which is by no means certain) – the UK's relationship with the EU will look and feel very much as if we are still in the EU. The difference, of course, will be that we will have no voting or other input on new legislation, although there will undoubtedly be a price tag for the agreement.

Ironically, the best possible outcome under this arrangement will be exactly the "pay, no say" agreement that the likes of Cameron (and many others since) have attributed to continued participation in the EEA.

Nevertheless, nothing is going to happen without the wholehearted cooperation of the "colleagues". Looking at it from their perspective, the UK will be asking the EU institutions to commit considerable resources to framing, negotiation and agreeing a complex treaty, the like of which usually takes many years to conclude.

Even with the best will in the world, to get this completed (and in force) by 29 March 2019 will be a major achievement. And, so far, there is nothing in the deal that would incentivise the EU and its Member States to commit the resources and the political capital to get it done.

Reference has been made previously to the UK's inability to see Brexit from the point of view of the EU and, in this case, this could prove fatal. Whatever confident pronouncements we might get from the Fox-Hammond duo, nothing is going to happen unless or until the EU has bought in to the process.

Necessarily, wholehearted cooperation from the EU will have its own price – financially and in terms of concession across a range of issues, many yet to be defined. Whether even these will lie in the realm of the politically feasible (for the May government) remains to be seen.

Thus, as always, having been fed on thin gruel once again, we are no further forward divining our EU-free future. One hopes that the position papers due to start flowing over the coming week might give us a little more information, although it would be unwise to expect much of this administration.

Personally, with the government having given no serious (or any) thought to the nature and substance of an interim deal, I think they are biting off more than they can chew. There is simply neither the time nor the capability to push through a complex agreement of this nature – given that there was the political will on the part of the "colleagues", which is very far from being evident.

There is no sign even that Cabinet members are even aware of the complexity of the task that Fox and Hammond are setting out. One can imagine many more months of bickering before there can be any consensus on what an interim deal involves, by which time it will be far too late to achieve a workable agreement.

And on that basis, all we have to go on is another draught of hot air. "Mushroom management", by contrast, would be a blessed relief. At least the mushrooms get fed something. We don't even get that.

Richard North 13/08/2017 link

Brexit: planet stupid

Saturday 12 August 2017  

Following on from the (issue-)illiterate piece by Marcus Fysh MP, another Tory MP, this one Charlie Elphicke, has added to the rotting pile with his own contribution.

With the silly season speculation about an "invisible planet" scheduled (by some) to collide with Earth and bring life to an end on 23 September, this leads me to my own speculative conclusion.

There really is an invisible planet out there – one to which an increasing number of Tory MPs have gravitated. It's called Planet Stupid, where a wealthy despot is bankrolling a competition for a million-pound prize for the MPs who manages to get published the most stupid article on the subject of Brexit.

The competition so far has been enormous, but Fysh and Elphicke are well up there with the leaders, alongside Daniel Hannan who is in pole position after the competition was extended to MEPs. There is no word as to whether it will be opened up further, to include Labour and Lib-Dem MPs but, if it is, there will be no shortage of candidates.

Somehow, I almost wish my fantasy was true. It would at least provide an explanation for the otherwise inexplicable phenomenon of so many MPs delivering the most extraordinary rubbish about Brexit, much of it flying in the face of known and demonstrable facts.

Thus we have Elphicke warbling about the need to define our own trade policy, with "full control of trade policy in goods and services" which, he declares, is "a key reason why we must have unfettered control of all our domestic regulatory authorities".  

Trade, he adds, is also about regulatory barriers and behind the border protectionism. These barriers particularly affect UK businesses, especially in the services sector. To that effect, he says, there is a lot "we can do to help our own exporters by making sure that our regulatory system is more competitive".

We know exactly where Elphicke is coming from here, joining in with his many "Ultra" friends in calling for "scrapping burdensome regulations". By such means, he endorses such stupidity as the argument that "leaving the Single Market would allow Britain to scrap 59 of the 100 most burdensome regulations on business, saving more than £4 billion". 

The really odd thing about all this is that one of the primary functions of MPs in parliament is to make laws (i.e., regulation), so you would think that they would have a basic understanding of its nature and application. After all, if they are making laws for the rest of us, they should know how and why they work – and especially Charlie Elphicke who, before being elected, was a tax lawyer.

It actually isn't that difficult to work out that, when it comes to international trade, much of the law produced is by no means "burdensome" but is, in fact, a trade facilitator.

To illustrate the principle, I am fond of quoting the EU's Classification, Labelling and Packaging (CLP) Regulation which sets the standards throughout the EEA for the labelling of hazardous chemicals.

No one in their right mind (not even a Tory MP) would go so far as to suggest that chemicals should not be labelled, so a law that requires that which should be done by any sensible supplier can hardly be considered "burdensome". But what does become problematic is when different countries define their own unique systems so that an international manufacturer can find themselves having to cope with dozens of different labelling systems.

Not only is there a direct cost element here, labelling requirements can become a very real barrier to trade, when consignments arrive at export destinations with the wrong labelling (for whatever reason) and are rejected by the customs authorities.

To address what had become a very real problem, therefore, the EU with the United Nations, cooperated to produce the Globally Harmonised System of Classification and Labelling of Chemicals (the GHS), which is now implemented internationally and, in the EU, by the CLP Regulation.

In terms of international trade, the effect of the regulation is that, as long as consignments of chemicals bear the harmonised labelling (including the standardised symbols), the authorities at the point of destination cannot refuse their entry on the grounds of inadequate safety labelling. And by this means, the regulation becomes a trade facilitator.

Another great favourite of mine is that infamous banana regulation. This is, in fact, a long-standing international marketing standard, the purpose of which is to enable buyers, thousands of miles distant from growers, to buy produce sight unseen and know what they are getting. 

The standard also gives the growers reassurance that, as long as their produce meets the standard, their claim for payment is valid and enforceable. They cannot be cheated by unscrupulous buyers arbitrarily changing the standard while the goods are in transit.

In Flexcit I wrote of my own research which showed that the official, standardised system of meat inspection came about as a direct response to the meat industry. Lack of uniformity, the industry argued, imposed "unequal liabilities" on traders and, where no inspection was carried out, "serious embarrassment" to honest traders was caused, "owing to the absence of any check on unscrupulous traders".

This was in 1922 and, since then, we have seen the growth in consumerism and increased involvement of the state in consumer protection and standard-setting. Thus, even though the medicines approval system is expensive to the point of being truly "burdensome", there is not anywhere any demand for its removal. Any relaxation in the requirements would be unthinkable.

Yet all of this seems to have passed by the Tory party "deregulators" who insist that the way to liberalise trade is to build a bonfire of regulation and allow some vast free-for-all that would, apparently, save nations and their traders billions of pounds.

The reality though is that the savings are to be found in more (and better) international regulation. Again in Flexcit I cite a claim that the global insurance industry could save "up to $25 billion annually" from harmonised regulation and consistent requirements.

The global pharmaceutical industry, with a turnover worth close to USD$1 trillion (2014), that could deliver annual savings in the order of $50 billion from international harmonisation of regulation. 

Elsewhere in the healthcare industry, there is $0.5 trillion tied up in inventory. Common standards applied globally could reduce obsolescence and inventory redundancy, cutting the amount of cash tied up in unnecessary stock and attendant storage costs, potentially saving $90-135 billion (USD) annually.

What is truly pathetic though is the infantile level of the debate that we're getting from Tory MPs. The "bonfire of regulation" rhetoric was coined in the 1950s by Winston Churchill and it has barely changed since. Even a 2009 report for the Conservative Party on regulation (The Arculus Report), scarcely mentioned its role in international trade.

It has been left to the much reviled EU to explore the role, while this working paper from 2001 deals with the argument at a level that would leave the average MP floundering.

We really are poorly served by this current crop of MPs. But if they insist on living on "Planet Stupid", we are not going to get much better. But where we suffer from their stupidity, they also lose any entitlement to respect. If they want more than contempt from right-minded people, they need to up their game.

Richard North 12/08/2017 link

Brexit: an inevitable botch

Friday 11 August 2017  

To be fair to the unreconstructed remainers, if the referendum had gone the other way, I would not have given up campaigning to leave the EU. And I'm pretty sure that Farage and all the hard core leavers would have continued their campaign.

We'd have been in a situation similar to that in 1975, when the result took leaving off the agenda, but didn't settle the question. It took until Maastricht for Euroscepticism (as it then became called) to build up a head of steam, but in the meantime people such as myself hadn't gone away. We were just biding our time.

Thus, if the remainers want to set up a new single-issue political party, in the wake of James Chapman, who are we to object? We had Ukip, for what good it did us, so if the remainers want to go through all the toil and trauma of setting up a minority party, we can only wish them God speed.

To my mind, the remainers are an irrelevance. The problem we have is our own side, the "Ultras" who are set on making such a mess of Brexit that we could end up back in the EU in all but name, by default – a means of mitigating the damage caused by leaving.

The scenario in this case involves the post-Brexit EU-27 producing a much overdue treaty, in which they formalise their "Europe of circles" with the eurozone at the centre and rest forming an "outer circle" along the lines of the Spinelli/Bertelsmann "Associate Membership" – even if they gift-wrap it in a different name.

To a traumatised UK, the associate membership (or "economic partnership" if you like) can be made to look sufficiently different from full EU membership to make it saleable to a majority, including those who have turned away from Brexit and are looking for a new start.

Doubtless, we would have to go through the process of another referendum but, after a botched Brexit and the recession (if not depression) that follows, who is there amongst us who could be confident of the "no" proposition carrying the day – especially if the "colleagues" roped in the Efta/EEA members to their newly-formed outer circle.

The ultimate irony of the current situation is that, with the talk of transition and the prospect of us being unable to make a clean break from the EU for a number of years, the one sure way of securing a permanent "divorce" is to go for the Efta/EEA option. Efta membership is legally and practically incompatible with membership of the EU.

What so few people realise is that Efta/EEA never was an easy option, and there were going to be many loose ends to tidy up as well. Simply, this option was the only way we could secure a stable deal within the two-year timescale afforded by Article 50.

Even then, what I had in mind was a delay of at least a year before invoking Article 50, to give us time to make soundings to the Efta members and secure an agreement in principle that we could re-join Efta – the timing to coincide with our leaving the EU.

Since we are already a contracting party to the EEA Agreement, there would then be nothing to stop us negotiating with the EEA (through the Council, the Joint Committee and the Parliamentary Committee) to produce technical protocols and annexes to the Agreement, to cover our immediate administrative needs brought about by our EU withdrawal.

Even fewer people realise the extent to which opting for Efta/EEA takes the pressure off the Article 50 process, leaving – as I explained last year the bulk of the technical negotiations to be conducted with the EEA Joint Committee.

Had we gone for the year's delay in invoking Article 50, and made a good start with the Efta talks, would have had, in effect, three years to work out the technical details of our withdrawal, taking us out by June 2019.

In that context, the greater damage has been done by the "Ultras". Their antipathy to the Efta/EEA option has blocked us from taking the most effective and secure route to leaving, plunging us into uncertainty, where none of protagonists seem to have the first idea of what to do next.

Even worse, we have the likes of MPs Heidi Allen and Marcus Fysh who Pete so neatly dissects. With these people in positions of influence, alongside a legacy media which has completely lost the plot, there is little chance of the government coming up with a credible alternative sometime soon.

In fact, apart from the Efta/EEA option, there never was a credible option for leaving the EU. Any attempt to craft a "bespoke" agreement outside the EEA framework is going to bog us down in detail and absorb more time than we have.

By this measure, there is nothing the remainers can do to harm Brexit which the "Ultra" faction of the leavers haven't already done, with the unwitting assistance of the useful fools, such as Allen and Fysh, from both sides of the divide.

What we also tend to see is a conjunction of interest between the extremes of the argument, both seemingly wanting to sabotage a sensible Brexit plan for their own particular reasons.

It is here that Chapman's suggestion of a new party gets interesting. He wants to call an anti-Brexit party the Democracy party – obviously unconscious of the irony - arguing that Brexit is a "catastrophe" and pushing for a new referendum to get us back in the EU.

Those who would have it that Brexit is the problem, though, have got it badly wrong. There are good reasons why a well-managed Brexit could be beneficial. It is not the idea which is damaging, but its poor execution.

To that extent, we would use our own political party to guide us through Brexit – a centralist party of national unity that is prepared to put country before party and work to a stable, ideology-free Article 50 settlement, alongside a trade deal that is as close to the EEA Agreement as we can get it.

As time has gone on though, it has become more and more apparent that neither the government, parliament nor the media are up to the task of defining or shepherding us though the Brexit process. The think-tanks have shown no ability to fill the gaps, and academia – traditionally the intellectual resource to which governments turn in time of need – has retreated into a self-referential miasma devoted to applauding (and rewarding) its own "brilliance".

Rarely have all the instruments of what the pundits like to call "civil society" simultaneously failed to step up to the plate, and deliver answers for the most complex challenge of the century (so far). Restoring its capabilities is not going to be easy and nor will it be quick.

Many of us, therefore, are slowly coming to the conclusion that a chaotic Brexit is an inevitability. As do our military in the early stages of a war tend to lose their battles as part of their learning process, it seems that the civil equivalent must do likewise. It must make a mess of the Brexit process – from which it too must learn or die.

In in the meantime we get to see Foreign Secretary Johnson jailed – as Chapman is suggesting he should be – then not everything is lost.

Richard North 11/08/2017 link

Brexit - the first year - New e-book by Richard North
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