Brexit: Global Europeans

Thursday 19 January 2017  

While we are beginning to see a reaction to Mrs May's bizarre claim that we can conclude a free trade agreement with the EU inside two years, there is another area that needs some really serious scrutiny.

This is the glowing, fluffy-bunny claim, expressed in her speech that she wanted "this United Kingdom" to be "a truly Global Britain". We are to be a country that reaches beyond the borders of Europe and "goes out into the world to build relationships with old friends and new allies alike".

The idea behind this, of course, is that we will compensate for the inevitable loss of trade with the EU Member States with increased business from other parts of the globe. Embellished by Liam Fox today, May's preferred outcome is that we become "a great, global trading nation that is respected around the world and strong, confident and united at home".

These two, of course, go hand in hand, but not in the way Mrs May might hope for. The world works in very different ways to the way it is painted by the free trade zombies.

I got an insight into this when, for over a decade, I worked for three trade associations, covering the egg, meat and cheese industries. One of those was the UK Egg Producers' Association, representing about 20,000 small producers, some of whom were general farmers who kept poultry, and some specialists.

Most of the eggs were produced by caged hens and a major cost at the time were the EU battery hen welfare regulations, which required considerable capital expenditure to service a market where the returns were already perilously slim.

As such, one might have expected a considerable backlash against "EU regulation" in general, and the EU in particular. But, in fact, industry-wide, there was no great hostility, but for a complex variety of reasons.

Firstly, in the downstream period after the Salmonella and eggs scare induced by junior health minister Edwina Currie, we had seen a torrent of UK law, much of it draconian, ill-thought-out and extraordinarily damaging. The intervention of the EU into the legislative field actually brought a degree of rationality and stability, shaving off some of the rough edges from the UK law and removing a few of the more obvious absurdities. At another level, no supermarket will buy produce that was not fully compliant with EU law

Secondly, from a purely protectionist stance, the fact that EU laws, and especially those on welfare, were stricter than US laws was welcomed. The economics of the industry were such that the US giants could produce eggs at anything up to 15p a dozen cheaper than European producers, while shipping them over in a Jumbo jet would cost about 5p per dozen. Put simply, if the UK market was opened to the US, the domestic egg industry would cease to exist.

Then there was a third, particularly interesting element. Very few of our producers actually exported directly to Europe or anywhere else, but the industry as a whole needed to export in order to stay profitable – and for that, virtually all producers had to comply with EU law.

The issue here was the spring flush. Although commercial laying birds are far distant from the original jungle fowl and live in completely artificial environments, they still go into high gear in the Spring (their natural laying cycle), whence egg production peaks.

This period, though, also matches Easter, one of the periods of highest egg demand – but not exactly. Before the Easter demand takes off, the hens are already in overdrive (especially if Easter is late). Producers watch nervously as a national egg surplus build up, and prices teeter on collapse. With predatory supermarkets, they can easily end up selling at less than the cost of production.

Fortunately, there is an answer – export. For reasons that were never clearly explained to me, the Dutch demand cycle was slightly different to that of the UK, taking off earlier in the year before the hens got going. Thus, by the early Spring, we could usually anticipate an egg shortage in Holland, driving up the prices there.

What then would happen was a number of entrepreneurs would contact UK farmers and buy up the entire UK surplus for a few weeks, and strip the wholesale market. They would fill up a number of containers for transport to the Dutch market. Because of regulatory harmonisation and the emerging Single Market, that had become a simple operation, allowing the price to be stabilised. For many egg producers, the money they then made represented their profit for the entire year.

The point here is that most of the time, most egg producers did not export. But they all needed to comply with EU rules, so that when market stabilisation measures were needed, their surpluses could be exported - even those bought off the wholesale market. And to add to that, the EU was keeping out the Yanks.

Bluntly, at the time, the last thing the egg industry wanted or needed was to drop out of the Single Market. Whether things are different now, I don't know, as I've lost touch with the industry. But I do know that producers would oppose the UK signing up to a free trade deal with the US – one that gives access to our market for agricultural goods. Not only the egg industry would be wiped out. Beef and milk producers would also go, alongside poultry meat and pig producers, plus many others. Meanwhile, a trade deal with New Zealand could wipe out UK lamb production.

Unsurprisingly, a trade deal with the US is not going to happen. By the time the Guardian and others have finished with their exposés on US livestock welfare standards, with cattle crammed in feedlots of a 100,000 or more head (pictured), there is no way a British public is going to accept US produce. And if we did, we would find it very difficult to export manufactured food products to EU Member States unless we could guarantee exclusion of US imports.

Interestingly, disparities in agricultural standards have (in part) been holding up TTIP and it is those same standards which have historically hindered agreement on trade deals between the US and Europe. Our regulatory regimes are just too different. There is no chance of harmonisation.

It is not only in agriculture, though, that this problem is going to be met. Two years ago, I was writing about international tyre standard, where the Europeans and the US had failed to reach agreement on a global standard via UNECE, handicapped by the differences in regulatory philosophies.

For this very reason, there has been no progress on the harmonisation of type-certification for vehicles, and no common code for the approval of pharmaceuticals. We also see significant differences in the regulation of biotechnology and financial services. Even philosophical differences in the regulation of toys create barriers between the two blocs.

This is not just – or at all – a problem of differences in wording between regulations (although such differences do not help), but in the use by the Europeans of the precautionary principle in relation to scientific uncertainty, to block the release of products. This compares with a legal obligation for US regulatory agencies to provide strong and reliable scientific evidence and to undertake economic cost-benefit analysis, when considering product approvals.

More generally, the European emphasis is on rigorous pre-release certification, conformity with which largely indemnifies producers from civil liability in relation to risks covered by certification. This compares with less proscriptive release requirement in the US, but with manufacturers exposed to civil action in the event of failure.

These differences will not be easily reconciled. As Hammond said over the weekend, we have largely adopted the European social and taxation model. But he could also have reminded us that we have adopted the European regulatory model as well. And such are the differences between that and US practice that it is very difficult to service both markets, unless volumes are high enough to sustain the additional costs.

When one adds to this the behaviour of different markets where – as the egg producer example illustrates – the UK industry is fully integrated with its European counterparts, the reorientation of UK trade is not going to be that easy. To become more "global", it will first need to become less "European", and that's going to take a little time – time we haven't really got.

Richard North 19/01/2017 link

Brexit: a Jumbo-jet crash

Wednesday 18 January 2017  

There has been much speculation as to whether we would be exposed to a car-crash or a train-wreck Brexit. But what Theresa May appears to be giving us with yesterday's speech is a Jumbo-jet crash (perhaps an Airbus A-380) on top of Whitehall.

Although some might regard that as an improvement, or might want the epicentre to be moved to the Palace of Westminster, the underlying message is clear. Mrs May has set her face against a rational, measured Brexit and is embarking on a wild gamble, the outcome of which she has no way of predicting.

Such is her idea of pursuing "a bold and ambitious Free Trade Agreement with the European Union", an undertaking which others have tried in the recent past – the most recent being Canada, which has spent eight years now in trying to bring an agreement to fruition, and we're still waiting. The possibility, therefore, of the UK negotiating a deal (and getting it ratified) inside two years is, to say the very least, remote.

Nevertheless, there are those who think otherwise. They argue that, because the UK is already in the EU and achieved full regulatory convergence, transition from one type of agreement to another should be relatively straightforward and swift.

That, however, is completely to understate the complexity of modern trade agreements. In addition to regulatory convergence, there must be a dynamic arrangement that will ensure the automatic uptake of new regulation, and also the changes mandated by ECJ judgements. There must also be internal market surveillance measures, agreed conformity assessment measures, customs agreements, dispute settlement procedures, agreements on competition policy, procurement and intellectual property rights, as well as systems to deal with rules of origin.

These and much else, will require an institutional structure to facilitate communication and ongoing development, a form of arbitration panel or court, and a consultation body, which allows input into, and formal communication with the EU's regulatory and institutional system.

With modern trade deals, there is also a huge element of conditionality, where parties are required to subscribe to common values on human rights (one of the main barriers to a free trade deal with China), on workers' rights, on environmental protection, wildlife protection and many other incidental matters.

Not for nothing do we see over 300 heads of agreement in the EU-South Korea FTA, of which regulatory issues are but a small part. And on this agreement, negotiations started in 2006 and the final agreement entered into force on 1 July 2011. However, this was only the last stage of a process which had begun in 1993. Delivery of the current 1,336-page trading agreement, alongside a broader-ranging 64-page framework agreement on political co-operation, took almost 18 years.

In the comments on a previous post, I have likened the commitment to securing a free trade agreement (signed and ratified) within two years, as akin to a British commander addressing his troops on Salisbury Plain, telling them they are to invade Iraq the next day – but they have to walk all the way from the UK.

This is my way of saying that to achieve a "bold and ambitious" free trade agreement with the EU inside two years is not just difficult. It is impossible. It cannot be done. And it doesn't matter how many times it is discussed amongst the chattering classes, it still can't be done.

And as if that is not bad enough, Mrs May is also talking about a transitional agreement, a "phased process of implementation, in which both Britain and the EU institutions and member states prepare for the new arrangements that will exist between us will be in our mutual self-interest".

The point here is that she tells us she wants us to have reached an agreement about our future partnership "by the time the 2-year Article 50 process has concluded". That will, of course, have to include ratification of her "bold and ambitious" FTA, a unanimous decision which includes some devolved governments. But only then can the transition process be planned.

This in itself will be complex – far more so than people imagine. We are not signing up to a new treaty, de novo, or extending an existing treaty. We are transitioning from a very complex treaty organisation, out of the EU treaties, into a completely different relationship bound by an entirely new treaty. For a seamless transition, that is going to require changes to the EU treaty, by way of a separate succession treaty, which itself is going to require unanimous agreement and ratification.

Assuming that we get our FTA inside two years – which I've already suggested is impossible – we then have this further hurdle, a complex additional treaty, against an unknown and unspecified timetable.

In what appears to be a sideways swipe at the Efta-EEA option, Mrs May nevertheless rails against a transitional status, "in which we find ourselves stuck forever in some kind of permanent political purgatory". This is one of many places where she has quite evidently supped liberally at the Brexiteer kool-aid. How can it ever be permanent when we can leave the EEA with one year's notice? 

But where she has sated herself with the kool-aid is in her comments about membership of the Single Market. "European leaders", she avers, "have said many times that membership means accepting the 'four freedoms' of goods, capital, services and people".

"And being out of the EU but a member of the Single Market would mean complying with the EU's rules and regulations that implement those freedoms, without having a vote on what those rules and regulations are. It would mean accepting a role for the European Court of Justice that would see it still having direct legal authority in our country".

Says Mrs May, "It would to all intents and purposes mean not leaving the EU at all", speaking straight out of the Janet and John playbook on the "Norway option". But if Norway is most decidedly not in the EU, and is a member of the Single Market, how is the same arrangement for the UK keeping it in the EU? To claim that represents a total departure from reality.

And it is there that the German media finds her, with several journals suggesting that she has entered a fantasy world. Spiegel describes her as realitätsblind, which one of our commenters says you could translate as "in cloud cuckoo land".

The Germans appear considerably less than impressed with May's threat to "walk away", and her assertion that: "no deal for Britain is better than a bad deal for Britain". They are right to be unimpressed. As Pete has pointed out, this is not something the UK can sensibly walk away from. The Article 50 process is a matter of negotiating an administrative de-merger. Absence of a deal would create an impossible situation.

But if Mrs May does "walk", it is straight into the WTO option, the dangers of which she apparently dismisses on the basis that "we would still be able to trade with Europe". She does not in any way acknowledge the administrative complications that would arise, or the very real danger of a complete collapse in trade with the EU Member States.

Yet, if we were excluded from "accessing" the Single Market (i.e., trading with EU Member States), she seems to believe that there would be adequate compensation conferred in our ability "to change the basis of Britain's economic model". Missing completely, though, is any sense of timescale. While the effects of the WTO option would hit us within days, it could well be years before positive effects (if any) were felt from a new economic model. And what do we do in the interim? Rather than an answer, as always, there is silence.

Where there is no silence - and perhaps there should have been - is over Mrs May's comments on the EU's Customs Union. She repeats the error that full Customs Union membership prevents us from negotiating our own comprehensive trade deals. She then gets tangled up in the further misunderstanding about border controls - which lie outwith the customs union. The woman knows nothing, and has learned nothing.

She wants, or so she says, cross-border trade to be as frictionless as possible, not realising that border controls were only removed with the Single Market, the very thing she wants to extract us from. Inexplicably, she adds, "that means I do not want Britain to be part of the Common Commercial Policy and I do not want us to be bound by the Common External Tariff".

This is a confused person, one who goes on then to tell us that "these are the elements of the Customs Union that prevent us from striking our own comprehensive trade agreements with other countries".

In a small shaft of light, though, she then tells us she wants a customs agreement with the EU, but then – bizarrely – tells us that: "whether that means we must reach a completely new customs agreement, become an associate member of the Customs Union in some way, or remain a signatory to some elements of it, I hold no preconceived position".

This is almost akin to the Pope revealing that he has no "preconceived position" on Catholicism, mainly because he doesn't really understand it. And if Mrs May is out on her own, where the hell have her advisors been, feeding her this tosh? How can any nation possibly be an "associate member" of the customs union?

Pete picks up with his own analysis, as does Sam Hooper, so the final point I will make in this analysis, which is the first of what will have to be several over the next few days, concerns the money. Says Mrs May, "because we will no longer be members of the Single Market, we will not be required to contribute huge sums to the EU budget". This is issue illiteracy. We pay as members of the EU, not as members of the Single Market. And neither do Efta-EEA members pay into the EU budget.

What then follows in Mrs May's comments is worrying. "There may be some specific European programmes in which we might want to participate", she says. "If so, and this will be for us to decide, it is reasonable that we should make an appropriate contribution. But the principle is clear: the days of Britain making vast contributions to the European Union every year will end".

One can accept that the "principle" is clear. But we might have expected the Prime Minister to be a little more forthright about what else we are going to have to pay – not least for the decentralised Banking and Medicines Agencies. These, we are probably going to lose, but we will still want to participate in them, plus many others. But they get no mention. Nor does the equivalent of EEA/Norway grants, or even RAL.

It is my expectation that the "colleagues" will put the money issue up-front in the negotiations and, in respect of trade and other issues, insist on conditionality. We either agree to pay up, or the negotiations go no further. And despite the glib talk about the EU exporting more to us, it has been made perfectly clear that the integrity of the EU will come first. Even German industrialists and politicians are prepared to take a hit to preserve that.

Given the immediate reaction of the German media, I don't think Mrs May's threats will carry much weight. If the UK threatens to "walk", the "colleagues" will stand aside and let it happen. The UK is not the only entity that can restructure its economy. There are plenty of Eastern and mid-European nations which would be happy to pick up the slack.

All in all then, my view of Mrs May's speech is that it has been a giant misstep. If she has introduced clarity and a certain amount of certainty into the debate, it is at the cost of the UK's credibility. As such, her speech yesterday may turn out to be the most expensive and ill-conceived uttered by any politician since the war.

Looking back to recent events, one perhaps now has a better idea of why Ivan Rogers resigned. One might also take the view that the wrong person resigned. Whether the men in grey suits come calling, to invite Mrs May to book a trip to the Palace, remains to be seen. But every day now that she remains in No 10 will add to the growing sense of disaster.

Comments: a record number of 700+ on the previous thread shows what happens when this blog becomes so completely marginalised, as we are told it has. To continue our marginalisation, I have closed down the previous thread leaving this thread open, so avoiding duplication and (additional) confusion.

Richard North 18/01/2017 link

Brexit: a car-crash plan

Tuesday 17 January 2017  

Mrs May tells us she wants to build a great global trading nation. To that effect, she will pursue a "bold and ambitious free trade agreement with Europe". And what she is proposing "cannot mean membership of the Single Market". And, she believes: "No deal for Britain is better than a bad deal".

The woman has sucked up the kool-aid and reproduced all the worst aspects of the Westminster bubble prattle. We are so totally fucked.

Richard North 17/01/2017 link

Brexit: Theresa "Humpty Dumpty" May

Tuesday 17 January 2017  

"When I use a word", Theresa May said in rather a scornful tone during today's speech, "it means just what I choose it to mean - neither more nor less". So, when I say that we do not seek to adopt a model already enjoyed by other countries, it means exactly what I choose the word "model" to mean.

You may care to use the words "Norway model" to describe rejoining Efta and retaining our position as a contracting party to the EEA Agreement. But, to me, a "Norway model" looks rather like the picture above. If choose to call the Efta-EEA idea the "Norway option", then it is an option, not a model. And you don't need Humpty Dumpty to tell you that "model" and "option" are different words, with different meanings.

If you want to take my words literally, you're going to have a serious problem anyway. After all, you could call a free trade agreement a "model". And since other countries have enjoyed this "model" in their trading relations with the EU (if "enjoyed" is the right word to use), I could not possibly entertain, or even enjoy an FTA with the EU.

On the other hand, if we look in detail at the structure of the EEA Agreement, you will find that the basic core is the Agreement itself, but much of the detail is contained in the attached protocols and annexes, which are very much part of the treaty.

You will also find that each of the Efta members, Norway, Iceland and Liechtenstein, have defined their own specific terms via country-specific references in these attachments, which effectively make them unique – bespoke agreements for each of the countries.

In that respect, I could easily define a "bespoke" agreement with the EU via the EEA Agreement. With multiple protocols and annexes specific to the UK, it would be unique to this nation. And it would not be a "model". It would be the real thing, 1:1 scale.

Similarly, going for the Efta-EEA option means that we are truly out of the EU. It is practically and legally impossible for the UK to be a member of Efta and also hold EU membership. Efta-EEA membership is not partial membership of the European Union. It is not associate membership of the European Union. It does not leave us half-in, half-out. 

- - - -

So much for Mrs May's speech. As to whether she is going to make use of the Efta-EEA option, and thus avoid a "hard" Brexit, no one out here actually knows. She could very easily kill the controversy by stating, unequivocally, "I will/will not withdraw from the Single Market", or words to that effect.

If she does not use those specific words, and makes no direct reference to the Single Market, then it means she is keeping her options open. And if she is keeping her options open, that means nothing has been settled – whatever the legacy media might report.

Richard North 17/01/2017 link

Brexit: the cheating Lyons

Tuesday 17 January 2017  

For those of us who trail in the wake of Dietrich Bonhoeffer (see page 9) and regard stupidity as a social phenomenon rather than a congenital defect (like an infectious disease, with transmission characteristics similar to STDs), Dr Gerard Lyons is an excellent subject for study.

This is the man who, in August 2014, while he was still working for the current Foreign Secretary, wrote a treatise called The Europe Report – a win-win situation. Amongst the gems he offered was the claim that: "Article 50 explicitly states that the other remaining members of the EU would decide the terms of the exit, not the country that is leaving", thus confirming Bonhoeffer's thesis.

In considering how we would leave the EU, Lyons also argued that the UK should "be proactive in seeking an amicable separation", to which effect he suggested that "not invoking Article 50 would make more sense". It could be seen as "starting with a clean slate in determining the future relationship with Europe".

Basically, all the mad nostrums that were floating around at the time, Lyons Hoovered up and regurgitated on the pages of his report. This led us to conclude that it was a "disgustingly superficial piece of work, technically illiterate, flying in the face of treaty provisions, written under the hand of a man who is as ignorant of the EU as his master".

The thing about Lyons and his ilk, though, is that they occupy their own, intellectually sealed bubble, where contact with the outside world is rigorously controlled and anything but unconditional adulation is totally ignored. Even more temperate criticism from prestigious sources doesn't make the cut, so that where – as was averred – he makes errors of judgement and fact, these remain uncorrected.

I like the measured tone of the piece that tells us that Lyons "states factually that every IMF Chief has been a European and every World Bank President an American". Writes George Magnus, "Jim Yong Kim might beg to differ. He is a South Korean by birth and current President of the World Bank. This doesn't mean Lyons's case for Brexit is irrelevant, but it betrays an inattention to detail".

That same "inattention to detail" had Lyons claim that "the terms of the Norwegian Option [the EEA Agreement] were negotiated by Norway in anticipation of joining the EU, but its people subsequently decided not to join".

This is so absolutely and demonstrably untrue that one despairs that it is so often trotted out – not least because, as we record here, the EEA Agreement stemmed directly from the Oslo Declaration of March 1989 as Efta's response to the plans of Jacques Delors on the completion of the Single Market. The Agreement was crafted as an alternative to EU membership, not as a preparation for it. The Norwegian political elites subsequently tried to join the EU because the EEA Agreement (in refusing common decision-making) did not satisfy their ambitions.

The persistence of this myth illustrates the refusal of Lyons and the co-denizens of his bubble to engage with the outside world. Their arrogance - in assuming that their flawed and often totally inaccurate versions of events represent the truth - makes them the dross they are. But it also ensures that their work will continue to be riddled with errors, false assumptions and the clinical stupidity with which we are all too familiar.

At the time he produced his 2014 report, I wrote of Lyons that he and his like had done us one small service. They had shown us with absolute clarity that the establishment was not the place to look for a workable EU exit plan.

Yet, such is the continued arrogance of the man that, fortified with his own ignorance, he has teamed up with fellow illiterate, Liam Halligan – the "leading Telegraph economics commentator" - to produce a report on the eve of Mrs May's speech. This one is called "Clean Brexit" – purporting to be the very thing he has shown himself incapable of doing – a workable EU exit plan.

In this, we get the ritual demolition of the Single Market (couched as the "Norway option"), with the same tired arguments. Nothing of the debate of the last two years has percolated the man's excuse for a brain.

But it is a measure of how successful we have been in shaping the agenda that Lyons adds to his diatribe by introducing what he calls the "Liechtenstein model". This is what he has to say about it:
Liechtenstein, despite EEA membership, has negotiated its own tailored EU immigration policy, leading some to suggest it could act as a model for Britain outside the EU but retaining Single Market "membership". Liechtenstein, though, is a rather densely-populated microstate, while the UK is the second-largest EU economy and a major immigrant destination.

It is almost impossible, given growing public disquiet across the EU relating to Schengen, that the EU27 would grant the UK the perceived economic benefits of EEA/SM membership, while waiving "freedom of movement". Were Britain to gain such a concession having voted for Brexit, that would fuel already growing demands for EU referenda across other large members states - something Brussels and incumbent EU leaders are desperate to avoid.
Such as this is a more than adequate demonstration of the arrogance of Dr Lyons - and also his almost complete lack of understanding of this subject. Like so many, while he is forced to acknowledge the issue, he does not identify the main source of argument. Instead, he misrepresents it and, in two short paragraphs, purports adequately to have responded to 20 pages of the closely-reasoned argument here and here.

It is this approach which poisons the debate. Lyons sets himself up on high as the arbiter of a sterile argument which he himself defines, having run away from the real issues and avoided engaging with knowledgeable critics. He speaks only to his adoring claque from whom he gets no dissent.

Those less inclined to adoration, however, might note that in 2014, this much-revered man was promoting a comprehensive free trade agreement as "the most likely UK option". Negotiations would be "improved by the threat of Article 50", in which the UK would push for full market access. And that was a serious proposition.

In the view of the Great Man, it was unlikely that the EU would grant full access, a position which he conceded was "not optimal". Despite that, he thought that the "bespoke negating (sic) relationship" would give the UK "the broadest possible operating environment from which to pursue its post exit future".

What is interesting from today's perspective, though, was – in 108 pages – the minimal reference to the WTO option. With only seven mentions, the most substantive comment was when Lyons took note of an Open Europe observation that: "Britain is unlikely to face what some may call a worst case scenario of having to fall back on World Trade Organisation rules".

As a baseline for the current report, this could not be more extreme. With his "Clean Brexit", the UK would pass its "Great Repeal Bill", when the Article 50 window expires. Outside the Single Market and the customs union a Clean Brexit also means, he says, "we are able to walk away without a deal from the Article 50 negotiations, if any deal which is offered is poor".

The UK Government, Lyons avers, should say we are fully prepared to trade with the EU27 outside the Single Market and Customs Union, under WTO rules, with so-called "Most-Favoured Nation" status - "so the EU cannot legally discriminate against the UK, even if some Commission bureaucrats say that might happen". Thus, in the space of less than three years, we have seen an almost complete volte face.

Nevertheless, it is not for the Great Lyons to set out the consequences of a "walk away" policy. All we learn from him is that, if the EU insists on WTO-tariffs on UK goods and services, the UK will retain those tariffs on them in return. "And because we know we can walk away, that should encourage the UK to keep the Article 50 negotiations as simple as possible, giving us the scope to seek sector-specific deals - and that, indeed, is what we would advocate", he says.

It was three years ago that we were discussing this in Flexcit, pointing out the simple truth that, if the UK walks away from the table without an agreement, it confers on itself "third country" status. As such, the EU is obliged to levy its WTO "bound" tariffs. This happens automatically – the EU has no choice.

Then, if UK chooses to match these tariffs, levying them on imports from the EU, in order to conform with WTO rules against discrimination, it must levy the same tariff rates on other MFN partners – in practice all other counties. The Chancellor would enjoy the hit, but it would not do much for the prices index or the "just about managing".

That Lyons apparently doesn't know these basics is the price he pays for his self-induced intellectual isolation. You can ignore your critics, but that means you are doomed, groundhog day-style, endlessly to repeat the same mistakes. He shares this handicap with Peter Lilley who grandly acquaints us with the schoolboy howler, that under MFN terms, "our exporters would pay only £6.5 billion tariffs to continental governments". Does he really not know that importers, not exporters, pay the tariffs?

As much embedded in cloud cuckoo land, though, is Lyons. Under his "Clean Brexit", with the UK "trading under WTO rules with the EU if a separate agreement has not been reached", he actually believes "our exporters would have access to, but not membership of, the Single Market".

The fatuity of this statement almost beggars belief, even if we know what he is trying to say. The man is attempting to convey that we would still be able to trade with enterprises in EU Member States. What he doesn't state are the terms and conditions, and how hard it would be to get our goods into those markets.

This is actually cheating. Unless you are prepared to identify the difficulties and barriers that a preferred option might encounter, and state in some detail how you could overcome them, you are not being straight with your readers.

Being anything but straight, Lyons avers that his Clean Bexit is "quick and predictable" and "helps make leaving the EU as smooth as possible. This is a travesty of a claim. The WTO option would almost certainly precipitate a crisis. 

Yet, the man says, "by acknowledging we will be outside both the Single Market and Customs Union now, the Government can then also put policies in place for changes we know need to happen by the time Article 50 expires - avoiding the 'cliff edge'". What he doesn't say is how we convince the EU Member States to adopt policies which will allow us free access to their markets.

If we go back to 2014, the policy option that Lyons then preferred was the comprehensive free trade agreement. What we're getting now is that declaring Clean Brexit: "allows ministers and officials to reach out to various sectors for their on-the-ground advice, helping the Government to secure long-term UK-EU trade arrangements that ultimately benefit our people".

As we sift through the verbiage, we then get to the kernel: "the UK intends to leave both the Single Market and the Customs Union, as part of our broader exit from the EU". On top of that, Lyons says: "We should also make clear that while we are very happy to trade with the EU under WTO rules, as a consequence of a Clean Brexit, we would also be willing to strike UK-EU sector-specific deals of mutual benefit".

But, the man says, "to assume that the UK must strike any form of trade deal with the EU, though, during the two-year Article 50 window, would be a major strategic error". He tells us: "There is no need at all for the Government to attempt to shape any form of trade negotiation between now and March 2019, if the EU27 is not so inclined".

We cannot leave it there without stating that these "sector-specific" deals with the EU would almost certainly breach WTO rules, which means that even if the UK tried to pursue them, the EU would probably refuse to play. Thus, what we are basically left with is the UK operating under WTO rules in respect of trade with the EU, with nothing much else. This is supposed to sustain us while we expand trade links with the rest of the world.

The madness of this approach speaks for itself. In the thousands of words we have written on this subject, we have been at great pains to point out the pitfalls. No one has, sensibly and honestly, attempted to argue our points or come up with a credible rebuttal. But Lyons doesn't even try. He does what the rest of the bubble-dwellers do – he simply ignores them. He does not even concede that there might be any problems.

This is not only madness – it is fundamentally dishonest. It speaks of a system that is also dishonest, which survives only because it rigs the debate and excludes critical comment. Halligan, as the co-author, is a journalist, ostensibly committed to free speech. But he is part of that system too, one that seeks to shut down debate rather than entertain it.

As we hear Mrs May's speech later today, we can pause to reflect how much dishonesty and outright stupidity has been poured into attempts to influence her. If it succeeds and we even get close to what Lyons has in mind, we are in serious trouble.

Richard North 17/01/2017 link

Brexit: an epidemic of complacency

Monday 16 January 2017  

One of the oddest things I've been finding in my background research on the potential effects of a "walk away" from the Article 50 negotiations, leaving us relying solely on WTO rules, is how little information or discussion there is on the potential consequences.

There is an endless procession of people saying we should "just leave" and take up the WTO option – the latest being Bill Clarke in the letters column of The Sunday Telegraph, who says there is no need to reach agreement with the 27 EU Member States. But, like the idiot Goodman in Conservative Home, it is perilously clear that Clarke and most of the others advocating a "walk away" can have no idea of what this entails.

These people, it would seem, not only want us to jump off the edge of a cliff, they want us to do it blindfold and in the dark, mentored by people who are unable to tell us whether the ledge gives way to a six-inch or thousand-foot fall. And merely to ask is to be condemned for making things needlessly complicated.

This was very much the case with my research on the haulage industry and Brexit. Google those terms: "haulage industry" and "Brexit" and it is remarkable how little material there is. Then, most of the stuff produced, from trade or legal sources, is extraordinarily generalised, verging on the complacent. Throughout, one sees the assumption that any difficulties that might be encountered will be sorted out in the negotiations.

By coincidence, to add to my work, we now have a BBC article - repeated in the Independent and elsewhere - which warns that "people flying to the UK could face 'severe disruption' after Brexit unless the Border Force employs more people".

The warning comes from the Airport Operators Association (AOA) which is concerned that the creation of a "hard" border for the nationals of EU Member States would require extended processing times arising from more stringent passport checks, and result in longer queues at immigration control.

The AOA, which represents more than 50 UK airports, complains that a growth in air traffic has not been matched by an increase in resources for Border Force. Even without Brexit, this has already led to longer queues at passport desks. In 2015, a record number of 251 million passengers were processed through Britain's airports. Yet Border Force staff numbers fell from 8,332 in 2014-15 to 7,911 in 2015-16.

The coming problem, according to the Independent, is that EU nationals arriving in the UK are currently screened through a "soft" border – an identity verification that generally takes less than 25 minutes. Non-EU passengers are required to go through a "hard" border, which assesses whether they have the right to enter. This can take considerably longer – often up to 45 minutes.

If all overseas passengers have to be intensively screened, it is feared that this could lead to an increase in waiting times. Any such increase would be "highly disruptive" for passengers, airlines and airports. Airports would also have to spend millions of pounds on extra facilities for immigration checks. Tourism volumes - a major export earner - might be affected.

Almost needless to say, the official line is dismissive. A Home Office spokesperson says: "We are about to begin negotiations with the EU and it would be wrong to set out further positions in advance, but we are clear that Border Force has the capacity to meet passenger demand and maintain security".

Now, there are several points that arise from this. Firstly, there is the Home Office assumption that there will be negotiations. However, in the "walk away" context, there will be no [successful] negotiations with the EU – a "hard" border would be an inevitable consequence.

Secondly, although it has been suggested, pre-referendum, that UK citizens would be unaffected in British airports, it optimistic to suggest that they would be spared any disruption. Despite Home Office assurances, the Border Control is not meeting its targets. And with a common resource, the more intensive processing of nationals of EU Member States will require additional staff. Doubtless, they will be drawn from the general pool – with inevitable knock-on effects. At the very least, if more staff is employed, million-pound costs increases must be anticipated.

The third point to bear in mind is that any disruption is unlikely to be confined just to airports. It has already been suggested that the Channel ports could be affected. And as we have recently seen, the disruptive effect that even modest changes to passport controls can bring are substantial. Added to customs clearance hassles, the impact could halt the flow of traffic.  

The fourth point is that, if we decide to impose a more rigorous regime on our Continental neighbours, as night follows day UK citizens will be treated in a similar fashion when they seek entry to EU Member States. And just because more resources will be required to handle extra checks, that does not mean that European authorities will necessarily provide them.

Where there has been a breakdown in negotiations and the UK has decided to walk away, in the acrimonious aftermath one can hardly expect the French State to dole out millions of euros, just to give UK tourists an easy time – especially when French citizens are suffering considerable delays. And with talk of visas and the payment of fees in order to travel to EU Member States, the delays could multiply.

Perversely, nothing of this was foreseen by the Association of British Travel Agents, which published a report in March 2016 (pre-referendum) on the potential effects of Brexit on the travel industry. Its concern was of "a high likelihood of uncertainty during the negotiation period immediately following the referendum". "This", it said, "could last until a replacement set of trading relations and regulations were in place, which could take several years".

Even then, this was styled by the Daily Mail as a "disaster" for tourism. But not for one minute was it thought that the UK could walk away from the table without a deal – or that it might happen accidentally as a result of our negotiators running out of time.

Mind you, one has to wonder at the competence of ABTA officials who, along with Deloitte, wrote the report. They assert that a "leave" vote would trigger "two years of negotiations among the remaining EU Member States to agree the terms to be offered for a continued trading relationship with the UK". It then said: "The UK could not take part in these negotiations".

It was only months ago that this level of stupidity was being taken seriously by the media and politicians – another canard to fall by the wayside, only to be replaced by many more. Small wonder that there is so much uncertainty about outcomes.

More recently, there seems to have been an epidemic of complacency with Terry Williamson, CEO of hotel consolidator and inbound service provider JacTravel saying: "I am still exceptionally positive about this industry, both outbound and inbound".

Thomas Cook's UK boss Chris Mottershead, said: "There are actually more impactful areas that we have to deal with on a daily basis, whether it's a terrorist attack, or a volcano, you name it. There is always something this industry has had to deal with over the years and actually has done remarkably well in dealing with it". With that, he said, "I don't think this is any different in reality I don't see the significance of the impact of Brexit having the same impact as some of the others".

Against this, a trade press editorial recently warned the travel industry that it needed to re-think its place in the world given the multiple challenges facing the world. "The geopolitical realities of our world" – of which Brexit was one - "are worth embracing by the travel industry, instead of ignoring them or, worse still, wishing them away", it said.

It does seem, however, that the ignorance of the "walk away" advocates is being matched by an unwarranted degree of industry complacency – across the board. It appears that very little thought is being given to the impact of a complete breakdown of talks.

It is perhaps this, more than anything else, which is contributing to the air of unreality, whereby the risk of a "hard" Brexit is being understated. Should people start realising what is actually involved, there might be a very different political climate. The AOA report might be the first sign of this happening.

Richard North 16/01/2017 link

Booker: the Ridge line

Sunday 15 January 2017  

Sunday week last feels a long, long time ago, making the debut Sophy Ridge show a thing of the distant past. Oddly enough, according to a puff in the Guardian, her aim was "to show how politics affects those outside the Westminster bubble". In that, at least, she failed.

Instead, the facile woman went for the easy shot, trying to get Mrs May to admit that we would "leave the single market". And when the Prime Minister contradicted her and said wanted us to remain "within" the Single Market, Ridge took this as confirmation of our leaving, triggering a further costly slump in the value of the pound.

But, says Booker, in his latest column, had Ms Ridge been more on the ball, she would have pounced Mrs May's words and asked how, outside the EU, such a thing as remaining "within" the Single Market was possible.

She could have pointed out (as Booker has been doing consistently) that there is only one conceivable way in which, on leaving the EU, we could still do this. That is by rejoining the European Free Trade Area (Efta) to remain, like rich Norway, in the European Economic Area.

Says Booker, there are no ifs or buts here. Despite the efforts of so many to deny it, this is the only solution that ticks all the boxes of what most people say they want from Brexit. While freeing us from three quarters of the EU's laws, we could continue participating in the single market as we do now, thus avoiding a catastrophic disruption to our trade.

We would, he says, no longer be subject to the European Court of Justice. We could regain selective control over immigration from the EU. We could negotiate independent trade deals with the rest of the world. And we would buy ourselves time to discuss all those 30 other major policy areas needing to be resolved in the mere two years allowed for negotiations.

Ms Ridge may have got her headlines. But if only she'd been clever enough to ask the right question, she might just have prodded Mrs May into saying something more meaningful than all those vacuous headlines suggested. Now we must await Mrs May's promised speech this week to see whether we get more substantial clues than anything achieved by that silly interview.

Already, though, the mice are nibbling at the corn, with the Sun on Sunday claiming that Mrs May is expected to announce the UK "is prepared to leave the single market, the customs union and European Court of Justice".

Relying on "senior sources", the paper is able to divine that Mrs May will unveil her "secret masterplan" (should it be mistressplan?) for a "swift and clean" Brexit, and declare: "We're on our way out". Thus are we to get a "triple whammy departure from the EU to be triggered within 75 days": out of the single market, out of the customs union and out of the control of European judges.

The other Murdoch title, the Sunday Times, says much the same but at greater length. It is also declaring that Mrs May will announce that Britain is seeking a "clean and hard" Brexit, pulling out the Single Market and the customs union in order to regain control of immigration and end the jurisdiction of the ECJ.

This is the bog-standard media trope which has not changed in months since promotion to the collective "line to take", now having become "the Ridge line", to coin a phrase. However, in the ST story, David Davis adds to this, telling us that a "transitional deal" is on the cards. According to him, if necessary, the government will "consider time for implementation of new arrangements".

No more than speculation at this stage, this is embellished by the Sunday Telegraph which decides that Theresa May is "to side with Eurosceptics in major Brexit speech revealing what she wants from negotiations". Once again the trope emerges unscathed, with May supposedly seeking to appease the Eurosceptic wing of her party. The same phrasing emerges, as she contemplates a "hard", or "clean" Brexit.

But, in the Telegraph's case, their front-page lead is all based on the most tenuous of threads – not even on sources inside government. We now have to depend on "sources familiar with the prime minister's thinking". Whatever that might mean, it marks a new low in this journal's diminishing claim to be a purveyor of news.

Written before it got its hands on the Telegraph story and copied it out, the Guardian website was recording this "intelligence" as a "growing expectation". So, effectively, we're not being told the news, but simply what the media pack thinks might be the news on the day.

For all the speculation, the only thing substantive the media have to go on is an excerpt of the speech, described as "light on specifics". This has Mrs May calling for an end to the division and the language associated with it – "leaver" and "remainer" and all the accompanying insults. We must all "unite to make a success of Brexit and build a truly Global Britain" - as if.

Meanwhile one former "remainer", Nick Clegg, is calling for Mrs May to go for a "Norway-style trade deal", even if he seems somewhat confused about what is involved. He lauds Efta for allowing its members "the potential to suspend rules on free movement if a case can be made for doing so". In his whole article, the EEA is not mentioned.

This Sunday, therefore, the entire politico-media nexus is living up to its unenvied reputation for ignorance and ill-informed speculation. They make it up as they go along to compensate for the lack of facts, copying off each other in a frenzy of coprophagia, as they all feed off the same inventions.

Building of the torrent of speculation, the Independent builds the next stage of the fabrication. It pitches in inviting reactions from politicians to the event that has not yet happened. Thus it has Tim Farron tell us: "This speech proves that Theresa May is driving the country towards a divisive and destructive exit from the European Union".

"If the UK had voted 52-48 to remain you can bet that Theresa May would never be pushing towards a hard Remain. There would be no embracing of the Euro, no joining the Schengen Zone", he says. "But the Prime Minister seems hell bent on ripping up everything we share with the European Union no matter how damaging that is to the UK".

We also get Anna Soubry saying: "The Government has no mandate for this. To go into the negotiation conceding on the single market and the customs union is extremely serious and very bad news".

Following the example of the Independent, the Mail on Sunday adopts a similar stratagem, using Nicky Morgan to respond to an as-yet-undelivered speech. She believes that leaving the single market "would exact a disproportionate economic toll on UK businesses due to lost trade opportunities".

With all that, there is obviously no need now for the Prime Minister to give her speech. The media and the politicians have already decided what's in it and, in the style of Sophy Ridge, even if she says something completely different, they can ignore it and tell us what she "really" said.

On the other hand, we might just wait until Tuesday to see what she actually says. Even if we are not pleasantly surprised, at least we will be better informed.

Richard North 15/01/2017 link

Brexit: driving to distraction

Saturday 14 January 2017  

The zombies are in full spate – the latest being the foolish Syed Kamall, adding his name to the list of people telling Mrs May that she must "walk away" from the Article 50 negotiations if she doesn't get a deal "we are happy with".

Meanwhile, we've continued wondering about what precisely would happen to UK exports if we walk away without an agreement. And while we've so far been focusing on the treatment of trucks using the Channel ports, we've been most concerned with the effect of the lack of agreed customs arrangements.

However, this is only one element with which truck drivers have to concern themselves. The haulage industry is a highly regulated business, much of which relies of EU law, while the ability of British firms to operate vehicles on the Continent depends to a great extent on mutual recognition provisions, also mandated by EU law.

In the first instance, the truck drivers must themselves be licensed to drive their vehicles, to which effect they must hold the relevant category of driver's licences, issued by the national authority (DVLA). Permission for license-holders to drive on the roads of other EU Member States is conferred, in the first instance, by the Directive 2006/126/EC, which makes provision for all licenses (and their categories) to be mutually recognised.

Potentially, if we leave the EU without agreement on covering arrangements, the mutual recognition could fall, and UK-licensed drivers will no longer be able to drive under that authority once they cross the Channel.

That, though, should not be taken as a given. The EU law comes in the form of a Directive and has been transposed into the legal codes of all 28 EU Member States, with parallel provisions in the three Efta-EEA States, and Switzerland.

This is the case with the UK, where drivers holding what are called "Community licences" are permitted to drive on UK roads without any other documentation. We see a raft of legislation, over term, such as the The Driving Licences (Community Driving Licence) Regulations 1996, which have given effect to the EU law, making the mutual recognition dependent on UK regulations.

What is important in this context is the wording. There are references in the UK legislation to holders of "Community licences", to "Member States" and to "EEA states", which could be taken as making the permission to drive dependent on current membership of the EU/EEA.

How that affects UK drivers in EEA states would depend on the precise wording of the implementing laws in each of the states. If there are specific references to the UK without direct linkage to EEA membership, then UK licenses might remain valid. If, on the other hand, the wording is such that recognition is made dependent on EEA membership, there could be problems.

In short, it is not possible to ascertain exactly what the situation is regarding driving licences without going through the laws of all 30 of the other EEA members. It could well turn out that UK drivers will be able to drive in some countries but not others.

Then there is a situation that will arise when licences expire. Once we are out of the EU, the UK will no longer be able to issue Community licences, while the new UK design will not be recognised by EU Member States unless there are new mutual recognition agreements.

In normal circumstances, continuing such arrangements would not present the slightest problem. But if the UK decides to walk away from the table, there will be no dialogue and no mechanism for renewing agreements. Millions of drivers could find themselves having to apply for International Driving Permits – for private cars and well as trucks and buses.

Private car drivers might find this something of an inconvenience, especially as the permits are only valid for a year. UK citizens resident in EEA states might find themselves having to re-take their driving tests in their adopted countries, in order to continue driving.

For professional drivers of buses and HGVs, though, the problems multiply. They not only need the relevant licenses but, under EU rules, require additional "periodic training". Each must then hold a "certificate of professional competence" (CPC). Currently this requirement is mandated by Directive 2003/59/EC, another law which makes provision for mutual recognition alongside Council Directive 96/26/EC.

These provisions are implemented in the UK by the Vehicle Drivers (Certificates of Professional Competence) Regulations 2007, as amended, which define the CPC by reference to the seventh recital of the 2003 Directive.

These Regulations (and amendments) would, of course, remain in force after Brexit so the UK would continue to recognise the qualifications of drivers from EU Member States. But if their regulations are couched in the same terms as ours, UK CPC documentation may not be accepted in the EEA as we will no longer be a Member State.

Moving on from the drivers, there is a further tranche of regulation applying to transport operations themselves. No one is allowed to go into the haulage business without an operator's license. These are granted in accordance with Regulation 1071/2009/EC which establishes common rules concerning the conditions to be complied with to pursue the occupation of road transport operator.

As EU regulations, these would cease to apply once we leave the EU. Re-enacting them via the Great Repeal Bill would not make any difference to UK truckers seeking to drive in EU territories. While the Bill (once passed) would keep our system in place, without recourse to an international agreement, EU Member States would not be required to recognise our transport operators.

The same applies to Regulation 1072/2009/EC on common rules for access to the international road haulage market. Amongst other thing, this deals with the rules for cabotage, which have significant commercial significance for UK hauliers. Any rights they have will be lost, unless there is a specific agreement that allows us to continue benefiting from them.

With regard to operator licenses, what will really make a big difference is Commission Implementing Regulation 2016/480/EU, establishing common rules concerning the interconnection of national electronic registers on road transport undertakings, setting up the so-called ERRU (European Registers of Road Transport Undertakings).

This provides for a common database by which the different national authorities can verify whether a transport operator is properly authorised. Post-Brexit, the UK will no longer be part of this system, unless we negotiate continued access. This, of course, won't happen if we walk away from the table.

Even now, we're not finished as there us the small matter of the Motor Insurance Directive which has certain provisions which make life simpler for British operators. There are also other areas that need looking at, such as the Working Time Directive in relation to driver's hours. It is acknowledged that there will be no change in the UK in the immediate future, but Regulation 561/2006/EC falls when Brexit cuts in.

Then there is the roadworthiness package which deals with such things as MOT tests and roadside checks. The Directive, 2009/40/EC, is yet another which deals with mutual recognition of test certificates. Whether or not EU Member States will continue to recognise UK-issued certificates, after Brexit, remains to be seen.

Putting all this together, we are not making a "project fear" type of case that trucking in the EU comes crashing to a halt the moment we leave. Road haulage is a stable, mature industry where the regulatory environment is equally stable and well-understood, and where the UK is fully convergent with EU law.

Thus, we would expect in the ordinary course of events that post-Brexit continuity can be quickly and easily negotiated and any rough edges smoothed over before we leave. But therein lies the rub. While the necessary negotiations will most likely be uncontroversial, it has been assumed that alternative arrangements will be made. It is unlikely that a smooth exit can be achieved without fairly detailed technical talks, with firm agreements made to carry us over into the post-Brexit world.

Yet this is exactly where we will be if the "walk-away" zombies have their way, leaving the table with no deals – on anything. The chances then of the haulage industry enjoying a seam-free Brexit look extremely slim. 

Logically, issues have to be addressed before we leave, which makes walking away without a deal a fool's errand. Those advocating this as a possibility are driving us to distraction.

Richard North 14/01/2017 link

Brexit: blood, sweat and tiers

Friday 13 January 2017  

Driven by the hubris of his success in launching the Coal and Steel Community in 1950, Jean Monnet immediately set about planning what was to emerge as a proposal for a European Defence Community (EDC). This provided for a European Army, run by a European minister of defence and a council of ministers, with a common budget and arms procurement.

To create a "common political roof" over the Coal and Steel and the Defence Communities, Monnet's long-time colleague and close associate, Paul-Henri Spaak, suggested setting up a European Political Community (EPC), creating "an indissoluble supranational political community based on the union of peoples".

In September 1952, Spaak's proposal was jointly endorsed by the foreign ministers of the Six, along with the assemblies of the ECSC and the Council of Europe. The ECSC Assembly was asked to study the question of creating a "European Political Authority".

The result, from an ad hoc committee under Spaak, was a "Draft Treaty Embodying the Statute of the European Community". This was nothing less than the first formal attempt to give Europe a constitution, the text and structure of which was remarkable similar to that considered by the Convention on the Future of Europe, fifty years later.

However, when the treaty was brought before a hostile French Assembly on 30 August 1954, it was rejected by 319 votes to 264. The triumphant majority burst into the Marseillaise. The EDC was dead. The idea of a Political Community faded into obscurity: Monnet and his supranationism had suffered a resounding defeat.

Learning the lesson from this defeat, Monnet trimmed his ambitions and focused on what was to became the 1957 Treaty of Rome, creating a "Common Market". Overt supranationalism was replaced by a stealthy, step-by-step integration, using economic means to achieve political integration, a process which became known as engrenage, or "the Monnet method".

It was more than fifty years later, with the coming into force of the Lisbon Treaty that Monnet's ambitions were anything like close to the plans for a European Political Authority, a level of integration achieved through successive treaties which included the Single European Act, Maastricht, Amsterdam and Nice.

Had Monnet back in 1954 insisted on continuing down the path of "full-frontal" political integration, he doubtless would have encountered exactly the same level of resistance that he so ably later overcame. The European Union would never have come into being and we would not now be considering how to leave it.

Next Tuesday, this is something Mrs May needs to be thinking about, when - as promised she sets out her government's plans for negotiating Brexit, in a keenly awaited speech.

Already, the Prime Minister is under intense pressure to offer more details about her approach in advance of triggering Article 50, but she needs to realise that Rome was not built in a day – and neither was the Treaty of Rome. What has taken sixty years to build, on this the sixtieth anniversary of the founding treaty, cannot be undone in a mere couple of years.

If, as we fear, she is planning to go for a "bespoke" settlement, involving a comprehensive free trade agreement (FTA), the most likely outcome is that her negotiating team will run out of time and we will be left with no deal at all.

Any such plans are further complicated by the need for transitional arrangements which will bridge the gap between the end of the negotiations and the time when any FTA is expected to come into force.

Even though the pursuit of the final outcome may be forlorn, her team will still have to expend a great deal of time, effort and negotiating capital in preparing a transitional deal, which will have to be written into a succession treaty which must be approved and ratified by all current 28 members of the EU (including the UK).

This itself is a complex undertaking and, with no precedent to use for guidance, could absorb more diplomatic resources than both sides have to spare. The search for a workable transition could bring down the whole edifice.

Mrs May, therefore, needs to take a lesson from Monnet, and bide her time. She needs to ignore the siren voices, and the psychotic warbling from her own back bench, and decide to go for what is achievable in the time, rather than what is desirable but unattainable.

The point that she also needs make clear is that she is not only seeking to establish trade relations for the post-Brexit period. She is, as Pete points out, negotiating an administrative de-merger and a framework for continued cooperation with the EU on over three hundred areas of regulatory and technical cooperation.

Most likely, the issue that will have to be settled before progress is made elsewhere is the money. And that is going to require a level of compromise which will be completely unacceptable to the zealots. Mrs May is never going to please them, so she might just as well not even bother trying.

And while her backbench (or elements of it) can make trouble for her, if we take the Maastricht rebellion as a guide, the Right will huff and puff but, if the survival of the government is at stake, they will cave in.

Much more problematical is the prospect of an accidental Brexit. A completely unplanned break could have such a serious impact that we could see empty shelves in the supermarket, shortages of staple commodities, mass unemployment and a major run on the pound.

Given the timing of our departure, just one year before the general election, a botched Brexit is perhaps the one thing that could restore Labour's electoral fortunes under Corbyn. All the Opposition leader has to do is stand aside and let Mrs May wreck the economy – and then reap the harvest of votes as the Conservatives' reputation for economic probity is trashed.

Barring the zealots, though, no one is going to object if we are taken out of the EU by the end of March 2019, and then see a carefully managed transition to a defined end game that leaves us better off than we were before leaving.

And that is what Mrs May needs to focus on, on Tuesday. Far too much time and energy has been expending on discussing the process of leaving, while precious little resource has been given to the specifics of our final destination.

In 1940, when the people of the United Kingdom had their back against the wall, Winston Churchill promised them victory but, before getting there, he had nothing to offer but "blood, sweat and tears". As mature peoples, we can understand and respond to such a message and will do so again – even if, this time, it is more likely to be tiers than tears.

If Mrs May can offer us a worthwhile outcome, she need not worry too much about the interim period. If we have confidence that she can deliver, we will accept that this is something to work for and cannot be handed on a plate. And in Mr Monnet took 50 years or so to get us to this state, a decade or so to set the course or history right is not too much to ask.

Richard North 13/01/2017 link

Brexit: the trouble with bubbles

Thursday 12 January 2017  

If anyone needs to know what a "bubble" is, they need only go to Conservative Home, where one can be seen in action – defining its own ignorance by the voluntary exclusion of information. The core example is Paul Goodman's piece, asserting of the Brexit negotiations: "If May wants a good deal, she must be prepared to walk away – and mean it".

This fatuous trope is one which has been floating around the fringe of Westminster politics, much-loved by the Tory right which is convinced that there is no great peril in relying on the WTO option, despite the growing body of information to the contrary.

The immediate definition of the bubble comes with CH's treatment of the debate on Liechtenstein, the EEA and freedom of movement. For the sake of convenience, we can take the opening shot in the debate as this piece published in late June, just after the referendum.

Despite the best attempts at sabotage by the BBC and others, the thesis survives and, in recent days we've been getting indications that it is being taken very seriously by some MPs and in Whitehall.

We did not see it is a coincidence, therefore, when Christopher Howarth popped up on Conservative Home with a spoiler. Howarth is Steve Baker's gofer and the researcher for the European Research Group of right-wing MPs, a group dedicated to pursuing a "hard" Brexit.

There follows my comprehensive demolition of his ill-researched and sloppy work – which fails to refer to my original work and offers a distorted version of it. But this has completely ignored by CH, which treats as if it doesn't exist.

Instead, we get CH editor, Paul Goodman, tell us that the non-negotiable baseline of Theresa May's Brexit negotiating position is that we must regain control of our borders. This means, he says, that we will no longer be members of the Single Market, since membership is incompatible with such control, "as Christopher Howarth explained yesterday on this site".

What now comes over is that, as far as Goodman is concerned, the matter is settled. Their favoured analyst has pronounced on it and the debate on Conservative Home is over. And this is how the ignorati manage to remain ignorant. They deliberately exclude themselves from information that might contradict their preconceived views, rig the debate and then seek to close it down.

Staggeringly, we find ourselves in agreement with President Obama who, in his valedictory speech yesterday, declared: "Increasingly, we become so secure in our bubbles that we start accepting only information, whether true or not, that fits our opinions, instead of basing our opinions on the evidence that is out there".

The trouble with "bubbles", though, is that their walls are invisible to those who are inside them – they act rather like two-way mirrors. Thus, people in bubbles (such as Obama) can see those around them but not their own intellectual prisons.

The antidote is open - and honest - debate. It also requires people to be scrupulously accurate in their research and then also to accept that much research is a continuum, where we are progressively learning, correcting our mistakes and adding to our knowledge. That militates against adopting fixed positions for all time, and also requires proponents to reconsider their positions when their factoids no longer support them.

But that is not the way of the self-referential Conservative Home. Another crucial piece of work to which they should have paid attention, but have ignored, is one by Pete, who is worth ten Howarths when it comes to critical analysis.

Days before Goodman's lacklustre article, Pete argued that we should only walk away from the negotiating table where we were negotiating a trade deal, in circumstances where failure did not alter the status quo. In the coming talks, however, failure would radically changes our standing in Europe and the world. The mentality that suggests we can walk away is one that has yet to comprehend Brexit.

Article 50 talks, he says, are not simply a matter of negotiating a trade deal. There is much, much more. The UK government is charged with negotiating an administrative de-merger from an organisation with which we have have a 44-year relationship, amounting to an unprecedented degree of political and economic integration. It must also negotiate a framework for continued cooperation with the EU on over three hundred regulatory and technical areas, covering a huge range of issues. 

As such, there is no WTO baseline. Failure to agree an ongoing framework for the range of issues of mutual concern would mean that we would be looking at multiple a cliff edges. Dealing with them would require a number of emergency measures which could very easily be sabotaged by Member States looking to capitalise on the confusion. We would have no formal means of discourse with the EU and all of our enhanced rights would vanish.

This is the point that is being missed. Long ago when we were first writing what was to become Flexcit, we confronted the range and complexity of the issues to be discussed and concluded that we would be hard pushed to complete talks inside two years. Something had to give. Our answer was to "park" trade, taking the Efta-EEA option off the shelf in order to continue our trading relationships, buying us time to deal with all the other issues that demand attention.

This was never about the Single Market - or even just trade. Eventually we saw the UK leaving the Single Market, but on our terms at a time of our choosing – not under the cosh of time-limited Article 50 negotiations. The key issue was and is not whether we leave the Single Market, but when and how.

As we pursued these ideas more deeply, we eventually concluded that we should take the Single Market with us, and reform it as an intergovernmental institution based in Geneva, exploiting the process of globalisation which is already under way.

Needless to say, none of our concerns about the dangers of the WTO option percolate Conservative Home and its fellow travellers. For Goodman, its "minuses" amount merely to "finicky details" and "potential problems". One of the most obvious, he writes, is whether our customs would have the capacity to cope with the new conditions. Then there is the mass of "finicky details" that have the potential to add up to significant problems.

Displaying world-class ignorance, Goodman goes on to say that one of those most often cited is aviation – flight numbers, landing slots, and so on. Another, he says, is the recognition of the licensing of medicines.

Separately, says Goodman, there is the question of how Britain and Ireland would handle customs, border control and citizenship. The controversy over how important passporting is to the City rolls on. But, he says, it is far from impossible to believe that, although the City won't collapse, some jobs will leak abroad (though less to Paris and Frankfurt than to New York). Some firms might take fright at tariffs, low though most of these will be, and seem to relocate. Potential investors could look elsewhere.

Bizarrely, in Goodman's single reference to customs, we see only doubts expressed as to whether our customs would have the capacity to cope with the new conditions. There is nothing of the newly acquired status of the UK as a "third country" and the treatment of UK goods by the officials of EU Member States.

Part of our concerns relate to the cessation of mutual recognition of UK conformity assessment. In the event of a collapse of negotiations and the UK walking away, as Goodman wants, the existing EU regulations which confer such recognition cease to apply to the UK as it would no longer be an EU Member State.

However, Goodman's complacency is embellished by a commenter who asserts that there has been "a good deal of exaggeration of the risks". Conformity assessment problems, he says, "are overstated especially given the large amount of self-certification allowed and the abundant scope for a deal on mutual recognition". And therein lies exactly the problem. Indeed there is "abundant scope for a deal", but if the UK walks away, there can be no deal.

Similar mistakes are made by Andrew Chapman in a tedious series of posts in his blog, not least relating to the activities of "notified bodies" and the continued recognition of UK bodies after a sudden withdrawal by the UK.

The point I have made is that the validity of certification issued by notified bodies is verified by customs officials by reference to a list in the Official Journal. But, once the UK drops out of the system and becomes a third country, the UK bodies will be removed from the Official Journal. And if they don't exist, certificates issued by them cannot be validated.

There is provision within the Commision Guidance (p.87) for the suspension or withdrawal of a notification. Under normal circumstances, certificates issued by the notified body up to that point, remain in force, until their normal expiry date.

However, this is conditional on the notifying Member State ensure that the files of that body are either processed by another notified body or kept available for the responsible notifying and market surveillance authorities at their request. But since the UK – which would perform this function – would no longer be a Member State, it is hard to see how the conditions could be satisfied.

Despite this, Chapman thinks it is "highly unlikely" that existing certificates will suddenly lose their validity at Brexit. And if, he says, "that rather implausible scenario did come to pass, it would certainly be known about in advance, and UK exporters would then take the necessary steps to obtain valid certificates before they sent their goods to the border".

So here we go again. The point of relying on WTO rules as the "walk-away" option is that there is no advance notice - and no negotiation with the EU over mitigating measures. We face a "sudden death" scenario. In due course, as I point out in Monograph 2, emergency measure could be arranged, but it might be several weeks, if not months, before order could be restored to the resultant chaos.

Crucially, as the EU's own Blue guide points out, imports from third countries are treated very differently from those produced by an EU member state. While the latter are subject to internal checks by national market surveillance authorities, with third country imports, points of entry to the EU's external borders become the relevant places to stop non-compliant and unsafe products coming in.

Thus, customs authorities are told to "carry out initial checks, at the first point of entry, on the safety and compliance of the imported products". In accordance with specific guidelines, which rely on Council Regulation (EEC) No 339/93, those checks must be on "an adequate scale" and must include "documentary, physical or laboratory checks".

Thus, from a zero inspection regime, UK goods would become subject to mandatory checks, their scale based on risk assessment. This will be conditioned by this guidance. UK imports will effectively be treated as "new trade flows", where data are limited after the termination of customs cooperation arrangements. According to Community guidance on risk analysis, the imports will have to be regarded as high risk and subject to the highest intensity of checks. 

These are just some of the "finicky details" that have the potential to add up to "significant problems". They alone are so significant that trade – at least over the short-term – could grind to a halt.

Yet Mr Goodman and so many others seem to be in denial about the effects of the WTO option they so keenly advocate. But it is not good enough for them to skirt over the "potential" damage and leave the "finicky details" to others. All the indications are that this option will cause extreme economic damage. It is not something that should be entered upon willingly. Everything possible should be taken to avoid it happening.

Inside Mr Goodman's bubble, though, the seriousness of the situation has yet to percolate. And as long as his exclusion of relevant information is so rigorous, nothing will change. But in so doing, he and his gang have ruled themselves out of the game. If nothing can penetrate the bubble, nothing coming out of it is of any consequence.

Richard North 12/01/2017 link

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