Brexit: the bill comes later

12/06/2018

I think it's fair to claim that, over the years, we've been at the forefront on this blog, struggling to define the consequences of what has become termed a "hard" Brexit. And pointing out the pitfalls is done for no other reason than to better enable us to avoid them – in the same way that a passenger in a car will point out the potholes to a driver.

From that point of view, we are not seeking out obstacles for the sake of it. If there are ways of mitigating the effects of a "hard" Brexit, these should be explored. It is not in the interest of any sane person to magnify its effects or to ignore measures that could reduce its impact.

To that effect, just over a week ago – in the wake of the Sunday Times piece that forecast Armageddon in the wake of a "hard" Brexit – I looked at some of the ways the potential logjam at the ports could be reduced, or even avoided altogether.

A particular problem for the UK is in dealing with food consignments from EU (and Efta/EEA) Member States. Currently covered by Single Market provisions, they enter the country without any border checks. But, once we leave the EU, the UK will be required under WTO rules to impose checks on those goods to match those applied to other "third countries".

In the absence of adequate inspection facilities – and in any event – the time taken to subject consignments to the full range of checks would undoubtedly lead to significant delays in the ports, sufficient to bring the whole system to a grinding halt, creating the spectre of rotting food at the docks, empty shelves in the supermarkets and people going hungry.

However, in my piece from just over a week ago, I discounted the idea that the UK would purposefully block the import of foods from the continent. For a period at least, I suggested, the UK would most likely waive those requirements in order to keep food supplies flowing.

On the ball as always, we now have the legacy media trailing in our wake, the intervention in this case triggered by Rees-Mogg's comments yesterday when he argued that there would be "no need for customs checks at Dover on EU imports in the event of a no-deal Brexit". His thesis, therefore, is that any delays for exports to Europe would be France's responsibility.

Mogg hasn't really got the measure of this, so it's more a matter of him being right for the wrong reasons. "There will be no need to have any delays on goods coming in from the continent in the event we leave with no deal", he says, "because goods that are safe on 29 March will be safe on 30 March and that means inbound traffic ought not to suffer any delays because it will be our choice".

The facts of the matter, however, are that the UK will be obliged under WTO "non-discrimination" rules to afford the same treatment to EU goods as it current does to goods from third countries. But, under Article IX:3 of the Marrakesh Agreement establishing the WTO, it is entitled to seek a waiver, a provision which allows it to set aside any obligation imposed under the WTO/GATT agreements.

I've written about this back in 2016, referring to a book on the subject by Isabel Feichtner called The Law and Politics of WTO Waivers: Stability and Flexibility in Public International Law. This positions the "waiver" rather neatly as a "safety valve" which allows in "exceptional circumstances" provisions of the agreements to be suspended.

In procedural terms, an application for a waiver must be processed in 90 days – ostensibly by the Conference of Ministers with the support of at least three fourths of the Members. In practice, decisions are usually made by consensus by the General Council, and they are rarely rejected. From 1995 to 2010, over 400 applications were approved.

Given that there would be no difficulty in describing the circumstances of Brexit as "exceptional", the UK should not find it hard to get approval and, even if it is caught out by the 90-day timing, in practice applicants can apply the terms of waivers unilaterally, pending approval. By the time any dispute procedure gets under way, the full waiver will be in place.

Ponderously, the chief executive of the British Ports Association, Richard Ballantyne, finds it "difficult to see a situation where food and other products could be legally imported from another customs territory without being subject to some kind of border check".

Nevertheless, his Association understands that "government may choose to waive these in event of no deal", but concedes: "we are not sure of the basis of that decision". If he read this blog, he might be better informed but, as it stands, he presumes that this "would be an emergency option". Rightly, he adds that "it is certainly not a comfortable fallback position in the medium or long term", but then we are only talking about measures to get us over a short-term crisis.

The award for pomposity, however, goes to Steve Peers, a University of Essex academic and self-described "expert" in all things to do with Brexit. This "legal expert", grandly questions Rees-Mogg's claims, declaring that it is "hard to see" how unilaterally waiving checks "would be compatible with WTO law".

"The basic idea", Peers opines, "that we will check non-EU goods but not check EU if there is no trade deal done with the EU or a customs union agreement will violate the basic rules of the WTO, because that would be deemed discriminatory".

For sure, on the face of it, unilateral action would be contrary to the provisions of the WTO, etc., agreements, but even then this is public international law. It doesn't behave the same way as statutory law. For there to be an actionable claim, aggrieved nations have to demonstrate what is known as "nullification or impairment" – i.e., real loss. There are no "offences" as such and mere breach of a provision is not enough to justify dispute proceedings.

In addition to the waiver process, though, there are also the security exceptions, where any contracting party may take "any action which it considers necessary for the protection of its essential security interests", arising iter alia from an "emergency in international relations".

The "emergency in international relations" is so widely drawn that one could easily imagine that a "no deal" scenario in Brexit would fall under this exemption. And, where applicable, measures may be taken unilaterally which are not even amenable to the examination by the dispute panel.

Nevertheless, if this potentially keeps incoming goods flowing, there is still the likelihood of outgoing ferries (and Eurostar trains) being unable to offload at their destinations, as vehicles awaiting clearance back-up at the ports, causing congestion.

An answer to that, as I have already pointed out, is to manage the loading process so that vehicles are not allowed onto their transports (trains or ferries) until an equivalent number have been cleared at the other end and released from the ports.

This could mean sending transports to the continent either empty, or laden only with empty vehicles returning after delivering goods to the UK. This would keep the goods flowing, although it would have a massive effect on our exports, substantially increasing our trade deficit.

Nor does this rule out more proactive measures. It will be known that certain loads presented to EU Member States border authorities simply will not get cleared. Until the UK is re-listed for the relevant products, no live animals or foods or other products of animal origin, will be admitted into the EU Member States territories.

With these and other products, carriers can be subject to screening by UK authorities and only allowed movement permits if it is believed that goods will be accepted by EU Member States. Without those permits, vehicles will not be permitted to travel to the ports. At the ports themselves, port owners or managers may prohibit entry to vehicles without movement permits.

Given a certain amount of planning and anticipation, therefore, there is no absolute reason why we should see a re-run of Operation Stack on or after Brexit day. The reality might be completely contrary to expectations, with the ports themselves and their approach roads uncannily clear as the trucks are forced to stay at home.

The damage will not necessarily be measurable in terms of visible congestion but in lost trade and reduced economic activity. One can expect the value of the pound to fall as a result, accompanied by a surge in inflation and then a build-up of unemployment.

Deprived of their headlines and pictures of congested motorways, the media will have to rely on archive material (pictured) and might be easily fooled into believing things are under control. But the bill will come – and be higher than anyone could begin to expect.