Richard North, 20/08/2017  
 


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 does not 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 no 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 Scholefield, 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 Scholefield, 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.






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