Brexit: another phoney Brexit


Chancellor Philip Hammond made his much-delayed speech yesterday. This is the man who thought that the cladding used on Grenfell Tower had been banned in the UK, provoking a swift denial from a lead firm in the renovation project. 

And now he has been giving us the benefit of his wisdom on "what we want to achieve from those Brexit negotiations". The Prime Minister's Lancaster House speech in January, he said, "had set out clearly the arrangements that the UK would like to agree, built around a comprehensive trade agreement in the context of a deep and special partnership that goes much wider than trade".

But, said the Chancellor, "we recognise that this is a negotiation, and our negotiating counterparts, while broadly sharing our desire for a close ongoing relationship, will have their own priorities". As to our own priorities, we must be "clear" about them. When the British people voted last June, they did not vote to become poorer, or less secure, but they did vote to leave the EU. And we will leave the EU.

But, Hammond declared, "it must be done in a way that works for Britain. In a way that prioritises British jobs, and underpins Britain's prosperity". He added: "Anything less will be a failure to deliver on the instructions of the British people". This brought us to the moment we'd all been waiting for: how we were going to achieve what the Chancellor called "Brexit for Britain".

Firstly, he said, we would secure "a comprehensive agreement for trade in goods and services". Secondly, we would negotiate "mutually beneficial transitional arrangements". These would "avoid unnecessary disruption and dangerous cliff edges". 

Thirdly, said our miracle worker, we would agree "frictionless customs arrangements to facilitate trade across our borders – and crucially – to keep the land border on the island of Ireland open and free-flowing".

To achieve this last miracle, "in the context of our wider objectives" would, said Hammond, "be challenging". It will almost certainly involve, "the deployment of new technology". Therefore, he added, "we'd certainly need an implementation period, outside the Customs Union itself".

To allow this, current customs border arrangements would remain in place until new long-term arrangements were up and running. And then finally, Mr Hammond had one big trump card. He was going to take a "pragmatic approach" to one of our most important EU export sector – financial services.

This would need "a new process for establishing regulatory requirements for cross-border business between the UK and EU". This would have to be "evidence-based, symmetrical, and transparent" and "reflect international standards".

Cooperation arrangements had to be "reciprocal, reliable, and prioritise financial stability". Crucially these had to enable "timely and coordinated risk management on both sides". Third, these arrangements have to be permanent and reliable for the businesses regulated under these regimes.

As far as migration goes, Mr Hammond would have us seeking to manage it. We would not seek to shut it down. But, beyond that, no detail was offered. This, though, was the tenor of the entire speech. One could not say it was "wishy-washy" – just "wishy". The speech was long on aspiration but entirely lacking in execution.

Yet, despite this, the Chancellor was "confident" that we could do "a Brexit deal that puts jobs and prosperity first". This would be a deal that "reassures employers that they will still be able to access the talent they need", one that "keeps our markets for goods and services and capital open" and one that would achieve "early agreement on transitional arrangements".

And in this lovely, fluffy, cuddly Brexit that Mr Hammond has invented for us, "trade can carry on flowing smoothly, and businesses up and down the country can move on with investment decisions that they want to make, but that have been on hold since the Referendum".

I seem to recall writing earlier about my aspirations for gaining the exclusive franchise for Lunar Green Cheese, with a quota of 1000 tons a week, beamed down directly from the Sea of Tranquillity by a matter transporter. But, it appears, Mr Hammond has beaten me to it. In Brexit terms, he's cleaned out the pool.

There is no going back from this. Either we have a minister here with hidden depths, a man who all this time has been sitting on a brilliant plan, the like of which the world has never seen, or we're dealing with yet another Walter Mitty character, living in a parallel universe, and not even the same one as Mrs May.

Particularly interesting is that Hammond too has joined the ranks of the "transitionals". Having caught up with the rest of the world, in understanding that we cannot conclude Mrs May's "deep and special partnership" inside the period allocated, he has embraced the idea that everything can be solved by "mutually beneficial transitional arrangements".

What nobody is admitting, least of all Mr Hammond, is that a transitional agreement is not quick fix. He, like the others, should have appreciated that the complexity is such that the two-year Article 50 period is barely (if at all) sufficient to craft such an agreement.

Looking at the most recent member of the European Union, Croatia, we see that it applied for membership in 2003 and was in negotiations from 2005 until 2011. The 116-page accession treaty was signed on 9 December 2011.

The essence of accession treaty is that it is (to a very large part) a transitional agreement, easing the entry of a joining nation into the Union. That is takes six years is a good indication of how long these things can take and it is not at all untoward to imagine a transitional agreement with the UK taking those two years that Article 50 allows.

The very fact that so many are leaping on this transition bandwagon is in itself and indication that they are little idea of what is involved. Having already wasted so much time, it is questionable whether there is even time to complete a basic agreement.

Hammond, coming to the party late, is playing games. There is nothing anywhere to indicate that his "ideas" have any more substance than the words in his speech, which were pathetically thin. He has joined the ranks of politicians selling their phoney Brexits. That is all these people have to offer.

Richard North 21/06/2017 link

Brexit: anti-climax


In first-day talks that were described by EU officials as "window dressing", David Davis and his "Team Brexit" effectively caved in to Brussels, agreeing to phased negotiations on their three "divorce" points.

In what has been called a "major defeat", there was no commitment to run parallel talks on trade, that ambition having been abandoned within hours of the Brexit Secretary having arrived in the Council building.

Last month, Davis had boasted that he would provoke the "row of the summer" unless he got his way on immediate trade talks, predicting an early collapse if the EU refused concessions.

Instead, the Brussels agenda is going ahead, with three working groups set up, one on EU citizens' rights, one on the "financial settlement" and the other on border issues, in particular, the border with Northern Ireland.

At the press conference after the session, Davis had to admit that the trade issue would only be entertained when the EU had decided that "enough progress" had been made on the EU's negotiating priorities. Confronted with the "weakness" of his negotiating position, Davis could only put on a brave face, claiming: "It's not when it starts but how it finishes that matters".

That much we get from the media – a totally predictable outcome. Davis caved in because he had to cave in. It was that or walk away immediately. The "colleagues" were not in a mood for games.

Mr Davis's humiliation, though, is the least of our troubles. There is no evidence that Mrs May's weakened government has a coherent (or any) plan. Beyond phase one of the negotiations, there is a black hole, from which nothing escapes.

We are getting to the point where, as far as this blog goes, virtually everything that could be said has been said. We have reached the stage where we are simply repeating ourselves while the noise level continues to climb and nothing can be heard above the din.

It is not just a question of this blog being ignored. Even seasoned civil servants and former government advisors are being frozen out of the loop, while ever-vacuous academics fill space on nostrums which demonstrate how little they have thought about this complex subject.

Basically, we have one option – the one we've only ever had: a continuation of EEA membership, if the Efta states will agree to our joining them. Without that, there is an outside possibility of redefining the Efta institutions to permit UK participation without membership, but this will not be easy or quick to set up.

Even then, those who are belatedly, jumping on the EEA bandwagon display such a limited understanding of the EEA Agreement and the treaty structure – much less of the possibilities afforded – that we are scarcely in a position to take advantage of the option.

All that is theoretical anyway. The EEA is not currently on the table and Davis has retreated to cloud-cuckoo land. He insisting that there is much "common ground" with the EU and that the timetable for withdrawal, while "ambitious" is "eminently achievable". This is very much a case of fools rushing in where angels fear to tread, with nothing of substance to support it.

If ever there was a time for the slow-motion train crash analogies, this is it. There is actually little more we can do, other than watch and wait – and record the progress of that train on its final departure from the permanent way.

Richard North 20/06/2017 link

Brexit: not fit for purpose


Through the noise, we are getting occasional hints that "business" - as a generic – is coming out of hiding and is beginning to be more assertive in making its views known about Brexit, with articles such as this and this emerging in the legacy media.

Another important source of information (and influence) is the flow of briefing notes generated from private institutions, and especially investment banks and the like, which have enormous influence on their powerful clients, politicians and the media – even if they are sometimes a slow burn.

A good example of such is a note from JP Morgan Europe Economic Research unit on Brexit and the UK's membership of the EU's customs union. It is written by Malcom Barr, a staff economist whom we have met before.

Basically, his message is simple and straightforward. We cannot stay in the current customs union and, should we want such an arrangement, we would have to attempt to form a new customs agreement between the UK and the EU.

"This is not just a semantic point", Barr says. "The characteristics of a 'new' customs union would likely be bespoke and require detailed negotiation between the UK and the EU, even if in many instances they sought to replicate aspects of existing arrangements".

I am not unhappy to say that the briefing note goes on to advise its readers that an "excellent overview" of the issue is provided by Dr Richard North in his Monograph 16, which somewhat brightened an otherwise lacklustre day.

Interestingly, the contrast between the JP Morgan work and a piece on the BBC website by Jonty Bloom, is extreme. This purports to tell us the difference between a free trade area, the Single Market and a customs union. But the kindest thing we could say of it is that it is muddled.

In Monograph 16, we use the WTO definition of a customs union, as the "substitution of a single customs territory for two or more customs territories, so that duties and other restrictive regulations of commerce (with certain exceptions) are eliminated with respect to substantially all the trade between the constituent territories of the union".

We also note that the definition goes on to state that substantially the same duties and other regulations of commerce are applied by each of the members of the union to the trade of territories not included in the union. These common duties are known technically as a "common external tariff" (CET). And, to that extent, the customs union is a limited form of free trade agreement.

The modern version of the FTA, we state, goes much further, specifically identifying and abolishing qualitative and quantitative (non-tariff) barriers to trade between members, with particular emphasis on eliminating regulatory barriers.

However, we get nothing of this from Jonty Bloom. All we get from him is that "the EU is not just a single market it is also a customs union". As such, "the countries club together and agree to apply the same tariffs to goods from outside the union". Then we are told that, "once goods have cleared customs in one country they can be shipped to others in the union without further tariffs being imposed".

Bizarrely, nothing is said of the main characteristic of a customs union – that all internal tariffs and quantitative restrictions are abolished between members. Instead, Bloom rattles on about exporters have to contend with "rules of origin" – an entirely inappropriate reference in the context.

Then we get the ultimate in misinformation, where unfortunate readers are told that: "the UK could opt to leave the single market but stay in the customs union". We can't, of course but, in the event that we did, all the duties that we collected (less the administration costs) would be payable to the EU as part of its own resource.

Needless to say, within the EU's customs union, we would also have to accept the acquis pertaining to its function which would necessarily put us under the jurisdiction of the ECJ. All Jonty Bloom will say, though, is that: it "might" mean paying money to the EU and accepting ECJ judgements.

Finally, we get the typical confusion about the border controls – which are not removed by the customs union. But Jonty Bloom knows different. "A customs union", he says, "does however have one big advantage, it means the Ireland/Northern Ireland border would remain open and easy to cross".

This sort of misinformation simply isn't good enough, especially as Bloom evidently doesn't read his own copy, where he writes that the Single Market includes the "free movement of goods, people, services and capital". Despite that, he confers free movement of goods to the customs union, while failing completely to appreciate the difference between a customs union and an agreement on customs cooperation.

Yet the errors pouring out of the BBC are no better or worse than coming from the rest of the media and even (or especially) from politicians at all levels. Thus we have in The Times a front page report telling us that the newly re-appointed Chancellor, Philip Hammond, "is preparing to lead a battle within the government to soften Brexit by keeping Britain inside the EU customs union".

As we know - we the untertanen, but now joined by JP Morgan – this is not possible, but it is also unnecessary. We can very easily agree to trade with EU Member States on a tariff-free basis, without having to be part of a customs union, and without the common external tariff or the common commercial policy, which requires us to hand authority to make our trade deals to the Commission. It is there, though, that we would have to deal with rules of origin.

But there again, we get further confusion, as between the customs union and the common commercial policy, with The Times retailing the Chancellor's "belief" that ministers must rethink their decision to pursue an entirely independent trade policy" (on the basis that we stay in the customs union).

This is repeated uncritically by the Independent, while the august and self-important Financial Times has David Cameron calling on Theresa May to embrace a "softer" Brexit, while telling us that, "ideas circulating over how to soften Brexit include the UK remaining in the customs union".

These are yet more examples of the phenomenal level of ignorance about the EU and Brexit which prevails, reflecting the inability of the politicians to negotiate a suitable deal, and the almost complete inability of the media to report the issues properly. If neither know what they are talking about, how can we even begin to have meaningful negotiations?

The situation, though, is far worse than it appears. These issues have been part of the discourse for years, and the customs union "debate" can be traced back to last July when the issue was raised in the Financial Times. Not only do the players know nothing, in the space of nearly a year, they have learned nothing and shown no capability to learn. Their learning curve is almost completely flat.

With a situation such as this, there can be no room for optimism. If people cannot even grasp the basics and have no capacity to learn, when it comes to negotiating Brexit, they are simply not fit for purpose.

Richard North 14/06/2017 link

Brexit: the binary little world of Spiked Online


Writing in Spiked today, Mick Hume asserts that: "To be a member of the Single Market, a nation must submit to key EU rules and control from Brussels. As David Davis pointed out this week, the EU has insisted "you cannot stay in the Single Market and have control of your borders. There's no sign of them changing their mind". So the growing insistence among Tory Remainers that Britain must somehow remain in the Single Market is a coded demand for the UK to Remain an EU member state in all but name".

This is, putting it politely, total issue illiteracy. As a regulatory superpower the EU is in a position to set out the conditions of market entry. In or out of the single market those same rules will apply if we want to export to the EU. And given that half our exports go to the EU it's safe to assume that we do. The question, therefore, is whether we are part of that rule making process and whether we have an effective right of veto.

Outside of the single market you are a passive recipient of those rules without a firewall like Efta to put the brakes on Council decisions which determine the meaning of those rules. As a member of the single market the process of adopting EU rules is very much a system of co-determination because the single market is a collaborative venture between Efta and the EU. Every rule is debated and negotiated through the EEA secretariat. As a whole it represent only abut 20 percent of the EU body of law - none of which is under the direct jurisdiction of the ECJ.

Should we leave the single market we will still enter a comprehensive FTA with the EU - and like all agreements of its type it will establish either a court or a joint committee for the adoption of rules because free trade is contingent on regulatory harmonisation. Any bespoke agreement would have to replicate most of the institutional functionality of the EEA agreement simply because we have been in the EU for forty years. We are not actually capable of repatriating all of our administration. The process of leaving will have to be gradual.

The short of it is, even an FTA would make us a partial member of the single market - but I rather suspect that without the combined clout of Efta we would have substantially less power to veto the more intrusive rules while losing a great many trade advantages.

As to the assertion that you cannot have single market membership without freedom of movement, this is a myth put about by both sides. The headbangers do not want to be in the single market (mainly because they haven't understood it) and the remainers say the same because they have always been keen to kill the idea that there is a viable solution to many of the intractable problems created by Brexit.

The truth of the matter is that there are unilateral safeguard measures in the EEA agreement and they are there to be used. We can negotiate sectoral adaptations and convert them into a permanent waiver. If we want to keep an open border in Northern Ireland this is probably the only way to do it.

Furthermore, the repeated assertion that single market membership is remain in all but name is a lie. Mick Hume is, probably wilfully, repeating a stone cold untruth. That though is not surprising coming from Spiked who think the grubby details of Brexit are just for the technocracts and the "metropolitan elite" - which is actually why leavers don't have a voice in shaping Brexit. Nothing they say can be taken seriously.

I would once again point out that the single market may not be optimal but it is a fact of life. We cannot pretend otherwise and if we really do want to leave the EU it's the safest and fastest way to do it. At least then the political integration is ended and we'd have the Efta firewall. On present trajectory, chasing an illusory perfection, we are likely to crash out with nothing to show for it and will have to rebuild our trade relations over decades only to achieve what we could have had now.

We are risking the UK's prosperity on the back of the profound ignorance of our politicians and media. This is the debate that was lacking from the election and it seems to be absent now. There is a wilful refusal to get to grips with it. That will be our undoing.

We should also note that since much of our administrative capacity has been closed down because of our EU membership we will have to rebuild much of it, which won't be fast or cheap. So before an agreement can go forward we have to effectively agree to stay in the EU for ten years or more until we are ready to repatriate regulatory competences.

You've all seen what can happen in just a year - or even six weeks. Ten years is more than ample time to kill Brexit. In that respect anyone who is serious about leaving the EU should be pushing for the Efta EEA option because otherwise we will never get out. It may not be ideal but at least the deed would be done with minimal disruption to the economy. The rest we can sort out later.

The way it's going will end up with negotiations going round in circles just long enough for Brexit to be sabotaged. It's time for leavers to ask just how serious they are about leaving. If they are serious then they need to get to grips with the issues and face a few home truths. You have one option and one window to get out of the EU intact. Insisting on a pointless self-immolation Brexit will ultimately be self-defeating one way or another.

In the binary little world of Spiked there is such a thing as absolute sovereignty, there is no need for compromise, everything is simple and there's an easy answer for everything. They think that we are leaving the regulated sphere of the EU to join an unregulated wild west.

That world has not existed since 1992. That was the last time Brexiteers bothered to examine the issues. Spiked has only produced one position article on the single market - largely based on the findings of obsolete Tory think tank publications designed to cloud the issues. As much as it was riddled with errors it is basically the same position as the Toryboy zealots who think the WTO option is viable. Unequivocally, it is not.

Hume is right that Brexit very much is a democratic realignment and I concur that it is necessary and timely, but I do not support this unhinged clamour to inflict as much economic pain as possible on the back of a very slender mandate in a referendum we won by accident. There isn't a mandate for a self-immolation Brexit and most people are grown up enough to realise that there will be compromises. We must go forward on the basis of a national consensus. We cannot give way to those who only see the world in black and white - especially when they hold such obviously erroneous and infantile ideas.

I would also remind Hume that he does not speak for all leavers and not all of us are in a hurry to sever forty years of economic cooperation. I can't say what others voted for but I voted to end political union with the EU, not to put up trade barriers and enter a regulatory race to the bottom. There are no economic advantages to doing so.

If this really is just about democracy and politics, and not economics, then Efta is perfectly sufficient. Since we are witnessing the globalisation of regulation and the weakening of the EU as a regulatory superpower (not least because we are leaving) there is no reason to fear the adoption of technical regulation - and when you look at the substance of them you really have to wonder if it's worth going to the barricades over aubergine marketing standards. That is not what I have been vexed about for the last twenty years.

It's time for Spiked to ask what it is about the EU that really bothers them.

Peter North 13/06/2017 link

Booker: rescued by the voters?


Have voters rescued us from crazy hard-Brexit, asks Booker in today's column, retailing his son Nick's view that the British people have somehow managed to steer a safe path between Corbyn's suicidal economic illiteracy and Mrs May's hard Brexit.

The effect, which for many was an unforeseen outcome, has effectively been to relegate Mrs May's "no deal" strategy to the dustbin of history. But, inasmuch as a walk-away (in anticipation of the "colleagues" rushing after the UK delegation to offer a better deal) was probably a central part of her strategy, that may have left our "isolated and friendless" Prime Minister completely without a strategy.

As for Booker, he reflects that, for months now, he has been in the oddest position of his political life. In all the 25 years that he has been writing in The Sunday Telegraph about Britain's relations with the European Union, he has learnt two things.

One, which he was arguing long before it was remotely fashionable, was that one day, for every kind of good reason, we would have to leave the EU, which was doing more damage to Britain than most people had realised.

But the other, which he came to see ever more clearly the more he came to understand how the EU works, was that to extricate ourselves would be fiendishly complicated. It could only be sensibly achieved if we were fully wised up to all the dangers we would face if we did not handle it in the right way.

Initially, he was cautiously optimistic through all those months when Mrs May was still telling us that we would remain "within" the European market, which would give us the freedom to continue trading with Europe much as we do now, while so many other complex issues also need to be settled.

But when in January Mrs May delivered her Lancaster House speech, telling us that she was planning to leave not only the Single Market but also the wider European Economic Area (EEA), he (like many of us) was plunged in gloom.

As ever more knowledgeable people have been pointing out, this would inevitably present us with terrifying practical problems, which could so easily have been avoided if she had stuck to what she originally seemed to be promising.

Never did Booker think that he would be lined up with Michel Barnier, the EU's chief negotiator. But he was entirely right to point out that if we leave the EEA – and even more so if we "walk away" without a deal – we would be faced with a horrendous range of new obstacles to our trade.

The real problem, he says, is nothing to do with tariffs. What we have to worry about are those "non-tariff barriers" we would have made inevitable. Trucks piling up at Dover and in Northern Ireland because they would face border controls and inspections.

Exclusion from the system that allows our airliners to fly freely out of UK air space. Exclusion from supply chains that provide 59 percent of components for our successful car industry. Exclusion from many of the arrangements that have helped to make London the financial capital of the world. And much, much else.

It has been spooky how little of this has been openly explained and discussed, most notably in that dismally vapid election campaign. But ever more heavyweight voices have been chipping in – among them the World Bank, the OECD and JP Morgan – to warn of the colossal risks we would be running if we pursued Mrs May's hard Brexit – and, even more so, her threat to walk away without any agreement.

Yet now, with only eight days before those fateful negotiations begin, it is just possible that hard reality has the chance to break in on her hubristic dream. The woman Booker has in Private Eye been calling "Mrs Me" has already had one very unpleasant collision with reality.

But, whether consciously or accidentally, the British people may have given us an opportunity to save our country from another reality that is far, far worse.

Encouragingly, the immediate outcome has been to reactivate interest in the Efta/EEA option, with us seeing Ambrose Evans Pritchard dipping his toe in the water with an entry-level briefing in his Saturday column.

Although nearly a year has passed since the referendum, few journalists have displayed any evidence of improving their knowledge on the nature of the EEA option, largely trotting out the "same old, same old" mantras about losing the ability to control immigration, not having any influence over new laws and having to make contributions to the EU budget.

AEP does, however, make a passing reference to an "emergency brake" in respect of immigration, which suggests that he's actually regressed – choosing to opt for the prestige-laden, yet error-strewn outline from Lord Owen, ignoring the more reliable Flexcit of which he has been fully briefed.

Should the Efta/EEA option lodge this time round, we are going to have to go through the tedious process of watching sundry journalists and politicians attempting to ascend a precipitously steep learning curve – with no help from the academics and think-tanks who have nurtured their own ignorance to quite a staggering degree.

Most likely, the "collective" is probably incapable of acquiring the necessary level of knowledge. Their main handicap is that they are trapped by their insistence of prestigious sources – which are as ill-informed as they – but they will also have to admit that much of what they have been trotting out over the years is wrong. And if there is something the legacy media find very hard to do, it is to admit its own errors.

The thing is that, while the EEA Agreement is a formal treaty, with the same status as an EU treaty, it is very, very different in structure and mode of operation. In the way it treats EU legislation, the Agreement is unique, as indeed its inherent flexibility which affords opportunities to the UK that have scarce been appreciated outside a very small circle of specialists.

As long as the media and the politicians – together with their fellow-travellers in academia and the think-tanks – insist on remaining at key stage one, they will miss the detail that makes the EEA more than just another option into a powerful, all-embracing tool, which could help resolve many of the technical problems confronting the UK's Team Brexit.

Another thing being missed by the collective is any intelligent discussion on the shape of the end game. Not one of the commentariat seems to have understood that, if Efta/EEA is chosen as an intermediate option, simply to buy time to negotiate a free trade agreement with the EU, we will be in the absurd position of seeking an end game with puts us in a worst position then the "temporary" expedient.

To agree to the Efta/EEA option without a very clear idea of the end game, therefore, is to risk continued EEA membership becoming permanent – that is for as long as it takes the EU to "reform" the Agreement and turn it into associate membership by any other name.

That, of course, is what makes Flexcit different. And while our solution has attracted its quota of sneers, I have yet to see anyone come up with a lasting solution which offers as many possibilities, and rests on such a firm historical and political base.

This is also why, despite the naysayers and detractors (many of whom have never really understood the plan), Flexcit is still a viable plan and, with the general election result, is about to take on a new lease of life.

And what may give it a further boost is that which has been discussed on the comments of this blog, the suggestion that the media are being by-passed by social media and technico-political blogs such as ourselves.

Certainly, traffic on this blog has doubled since the referendum and the indications are that we are getting as many as 30,000 visitors (hits from unique visitors) on our best days – not that I am going to argue the toss on the finer meaning of net statistics. All I know for sure is that traffic is significantly up.

As for the comment traffic, this speaks for itself. I was rather pleased (and amused) to see not only a record level of well over 1,000 for the election special, but that it was more than double Conservative Home live election blog. What is also encouraging is the high quality of the comment. We are without the rancour which poisons so many other sites.

What this says is that the "conversation" is moving away from reliance on the media. People who really want to be informed have learned that they must go elsewhere, and this blogs prides itself for being in the forefront of Brexit analysis. That it is so obsessively and deliberately ignored by the jaded and increasingly irrelevant legacy media we wear as a badge of honour.

It seems the British people are not only making their views known in elections, but for every day that they are increasingly turning away from the media when they want properly to be informed. One of these days, the politicians will learn to follow.

Richard North 11/06/2017 link

Brexit: "Now let's get to work"


In the immediate aftermath of the May fiasco, we saw a succession of BBC employees telling us how they hadn't seen it coming. Yet, within a matter of hours, and without so much as a trace of irony, we're seeing lengthy news items and reports telling us in excruciating detail where the Prime Minister went wrong and why her campaign was a failure.

Bluntly, I don't want to know. The noise to information ratio has exceeded my pain threshold and shutting down this extraneous comment is the only way to stay sane. Let pundit speak unto pundit, and let them all glorify each other with their mutual applause. And they've finished telling each other how "brilliant" they are, none of us mere mortals will be any the wiser.

The thing we actually want to know, though, is something for which there seems to be no answer. Why is it that Mrs May, having called an election because it was so desperately necessary to give her a mandate for her "strong and stable leadership", seems to believe she can carry on as if it was business as usual, despite having trashed her own majority and left herself manifestly bereft of whatever mandate she did have?

The other big question is why, having so spectacularly failed, Mrs May hasn't already resigned, leaving the government in the hands of a caretaker, pending another leadership election.

One can only take her at face value when she tells us that: "What the country needs more than ever is certainty", despite our carefully crafted pre-election message warning that "the only certainty is uncertainty".

Despite us having to put up with her execrable campaign for the best part of eight weeks (less the gaps), the very least we deserved was a decent speech at the end of it all, but all we got by way of a "non-victory" address was less than three minutes of unenlightening prose.

"Having secured the largest number of votes and the greatest number of seats in the general election", our old-new prime minister told us that, "it is clear that only the Conservative and Unionist party has the legitimacy and ability to provide that certainty by commanding a majority in the House of Commons".

"This", she said, "will allow us to come together as a country and channel our energies towards a successful Brexit deal that works for everyone in this country, securing a new partnership with the EU which guarantees our long-term prosperity".

"That's what people voted for last June", she added, declaring: "that's what we will deliver". And in an appendage which I believe could correctly be described as chutzpah – having taking eight weeks off for an entirely unnecessary election campaign – she has the gall to tell us: "Now let's get to work".

For all that, it's going to be a little bit difficult to work out what our prime minister means by "work". One assumes that her "no deal" strategy is consigned to history, where it properly belongs, and where it must go if she is to cooperate with the DUP in engineering a "soft border" between Northern Ireland and the Irish Republic.

This immediately has the media noisemakers prattling about staying within the customs union in order to avoid the reintroduction of border controls. As always the collective has been unable to cope with the idea that the removal of such controls came with the introduction of the Single Market.

Should we want to reduce customs controls, then it is open to us to follow down the Efta/EEA path, thereby formalising the process of regulatory convergence which forms the basis of free movement of goods. As long as we also adopt and implement the EU schedules of tariffs, we then have the basis for a workable scheme.

We will still, however, need a comprehensive customs cooperation agreement but, if we choose the Efta/EEA route, the EEA Agreement provides a framework for such an agreement, without impinging on the Article 50 negotiating process.

The great utility of using the EEA Agreement is that the deal could be negotiated with the EEA Joint Committee, under the aegis of the EEA Council – freed from any procedural constraints that bind the EU's Brexit negotiators.

The prospect of this has already put the Efta/EEA option back on the agenda, when it had virtually been written off by the commentariat. But this has also flushed some of the zombie arguments from the undergrowth, as their advocates claim this to be a means of thwarting Brexit.

What we cannot and must not avoid, though, is the recognition that the Government has serious decisions to make. It can either continue to pursue its confrontational path, or it can seek technical solutions that will keep us trading with EU Member States while we develop our broader global interests.

However, if our own negotiators - pre-election – were unprepared for what was to come, the like of David Davis will be even less ready for the change in direction forced on him by Mrs May's failed escapade.

But, if we add to that the uncertainty of the prime minister's position, where so many expect her to be deposed at any minute, conditions are not conducive to measured policy-making.

It seems to me, therefore, that we need a dramatic gesture to get the Brexit show properly on the road. Having failed to get her enlarged mandate, Mrs May needs to develop a "big tent" approach and invite members from all the other major parties to join her in building a cross-party Brexit alliance, charged with building a consensus on policy.

The logic of this is inescapable, as the ramifications of Brexit extend far beyond any parliamentary term and will affect this country for decades to come. Depersonalising, and then depoliticising Brexit, making it the product of national unity would be a good start.

But before we do anything else, Mrs May should accept that this election has set back the Brexit process. It would be unwise to go ahead with the current timetable. An application for an extension of time should be lodged with Brussels, to delay the date on which we leave the EU.

Borrowing from the slogan, "a dog is for life, not just for Christmas" – aimed at educating people of the long term implications of buying a puppy as a gift, we should appreciate that what we do now with Brexit is going to cast a long shadow.

A little extra time spent now, rather than rushing to a botched Brexit, could yield dividends.

Richard North 10/06/2017 link

Brexit: election special


09:54: The noise to information ratio has dramatically increased as the broadcast media go into prattle mode. With only two seats to declare, the verdict of the people is now clear, so I will wrap up coverage and return for my normal posting schedule. Thank you to those many readers who stayed with me through the night, and thank you all for your continued support, financial and moral.

09:20: Barnier is offering an emollient message (tweet): Brexit negotiations should start when the UK is ready; timetable and EU positions are clear. Let's put our minds together on striking a deal. Meanwhile, all the media prattle is starting over, about remaining in the Customs Union. It's painful to listen to, as the pundits line up to parade their ignorance.

09:12: We're now on 647 seats declared. The Conservatives have 316 and Labour has 261. SNP is on 35 and the Lib-Dems have 12. Mrs May has not given any indication that she will resign. If she goes, it will have to be the men in grey suits. Uncertainty reigns.

05:00: We now have 600 out of the 650 seats declared and the final result is still in the balance. Labour have gained 29 seats overall and the Conservatives have lost 12. The SNP have lost 20 seats, while the Lib-Dems gain four. Amber Rudd, incidentally, keeps her seat in Hastings.  

Meanwhile, a watery light is breaking though the curtains into my office, I think it is time for a short break. I'll pick up the threads again when I've had some sleep. By the time I wake up, politically we'll be living in a different nation. 

04:45: Latest BBC forecast gives the Conservatives 318 seats and Labour 267. SNP get 32 and the Lib-Dems grasp 11. Ukip gets no seats at all, having lost Clacton, but - much neglected - the DUP get 10. That effectively gives Mrs May (or the new Conservative leader) command of 328 votes in the House. This is a working majority and is enough. The Conservatives will be able to form a government on the strength of this.

However, and obviously, Mrs May's authority is shot.She may not even have enough time to form a new government before she is deposed, and few "big beasts" will want to stand alongside her. On the other hand, the men in grey suits may go for that "period of stability", or even pull a caretaker out of obscurity to hold the. The one thing, though, none of us bargained on was, on the Friday morning, that we'd be talking about Mrs May's successor.

04:30: State of play: 535 of 650 seats declared. Conservatives have 244 seats, with nine losses. Labour has 227 with 25 gains. It is generally agreed that the Conservatives will fall short of an absolute majority. But, with the DUP's ten seats, they could form a government. It will be an extremely fragile government though, and one that will have no mandate to take a hard line in Brussels.

Mrs May's position as prime minister is now extremely fragile, and there will undoubtedly be manoeuvring to replace her. We may well be looking at another general election later this year, with no possibility of predicting an outcome. The great danger is that Brexit is put on hold, allowing a new government to row back on the referendum result. 

Everything is now up in the air, with no way of telling which way things will develop. There are far too many variables.

04:21: Alex Salmond loses his seat to the Conservatives, after 30 years in Parliament. 

04:16: Latest Labour gains from the Conservatives: Lincoln, Croydon Central and Warrington South and Reading. They take Leeds North West from the Lib Dems. Wever Vale goes to Labour with a near five percent swing (4.7 percent). Conservatives hold Thanet South, with the Ukip vote dropping from 16,026 (Farage) to 2,997. 

04:00: Latest projection from Sky News: a range from 315 to 325 in the upper range. With 471 seats declared, no definitive forecast can be made. Essentially, we are looking at a hung Parliament, with the Conservatives failing to gain an overall majority. 

It's going to be up to the Ulster Unionists to hold the balance of power. They will be in a powerful position to dictate the shape of the Brexit settlement. For the nation, I take this as a win, the best possible outcome from a scenario that did not hold a great deal of promise.

03:30: Mrs May retakes her seat (no surprise) and more or less concedes a hung parliament, calling for "a period of stability". Latest BBC projection gives 322 votes to the "May Team". Paul Nuttall gets 3,308 votes in Boston, down from  14,645 in 2015 - a humiliating snub. The Tories take the seat with 27,271 votes - a 19.8 percent increase, compared to the 26.1 percent drop for Ukip.

03:20: Labour gain expected in Canterbury, a seat held by the Conservatives since 1918.

03:16: Labour gains Bedford, Cardiff North and Stroud from the Conservatives, and East Lothian form the SNP. In all, with 331 seats declared, Labour have gained 16 seats. Conservatives overall have lost four seats, with the SNP gains keeping the party alive. SNP is taking a beating.

03:10: Lib-Dems take Bath from the Conservatives with a 17.6 percent swing. The Conservatives drop back two percent. Corbyn returns to Islington with the highest ever vote for his constituency. "Politics has changed" he says. He calls for May to go.

02:56: Conservatives lose Peterborough to Labour and Bristol North West. Vince Cable gets Twickenham. Ben Gummer, the "rising star" of the Conservative Party, loses to Labour in Ipswich, on the back of redistributed Ukip votes. Rudd is asking for a recount.

02:46: Nick Clegg out! Labour gain with 21,881 votes to 19,756. Alexander Johnson at Uxbridge keeps his seat, with a reduced majority.

02:42: Sky New projection: Conservatives seats range from 308-328, with a mid-point of 318. The complexity of the voting patterns preclude any tighter prediction.

02:35: Labour gain Midlothian from the SNP - the second Scottish gain for Labour, showing the traffic isn't entirely favouring the Conservatives. The Conservatives gained 13.5 percent but Labour got a 6.2 increase against 16.2. But the Tory swing wasn't enough to give them a seat.

02:30: Now 145 seats in. Labour up six and the Tories down one.  The Tory losses to Labour in Britain are being balanced by Tory gains from the SNP - a dynamic which will likely strengthen through the morning. At this stage, we could end up with the Ulster Unionists holding the balance of power. That could have a huge effect on the Brexit negotiations, as the Irish will insist on a "soft" Brexit in order to keep the border open. This would mean that we would have to go for an Efta/EEA option.

02:03: The story of the night is the collapse of the Ukip vote, with the demolition of the idea that the votes were going to drop into the lap of the Conservatives. Despite Mrs May donning the clothes of the Ukip hard-liners, significant (if variable) numbers are going over to Labour - enough to skew the results in Labour's favour. And news just in, Labour gains Battersea, ousting Jane Ellison. 

01:44: Swing to Labour in Putney. Justin Greening holds with a reduced majority. Talk also that Nick Clegg is out at Sheffield Hallam. Coming up to 50 seats, the traffic is "in the direction" of Labour, providing an early conformation of the generality of the exit poll. There is no way Mrs May can spin this as a success. In fact, she will be luck to survive this as prime minister. With luck, this puts her "no deal" back on the shelf. 

01:32: Tooting held by Labour, with a substantial increase in votes of 12.5 percent. This compares with a drop of 8.8 percent in the Conservative vote (compared with 2015). This not a Ukip effect here. It's a straight swing from Conservatives to Labour.

01:09: An interesting result from North Swindon. Conservative holds with 29,431 votes, an increase of 3.3 percent (up from 26,295 in 2015). But Labour gets 21,096, increased by 10.6 percent (up from 14,509). Ukip is down 12.5 percent (8,011 votes in 2015 to 1,564 this time). There is no way we can say that the Ukip vote is flowing to the Tories. 

01:09: Wrexham just in - a Tory target, held by Labour, ostensibly worse than predicted by the exit poll. Sporadic discussion on various channels is confronting the effect of the election on Brussels and the negotiations. If this is as bad as it is beginning to look, Mrs May will need to seek a time extension and put the negotiations on hold, pending another election in the autumn, when the Conservatives again will need to pitch for the "strong and stable" leadership that they haven't had from Mrs May.

01:03: Doing a catch-up, we have 15 results in, with ten seats going to Labour, which has taken 50.3 percent of the vote, with an overall swing of 9.2 percent. The Conservatives have taken five seats, again with an increased swing of 7.6 percent. This is a direct reflection of the collapse of the Ukip vote, which has dropped 13.5 percent, currently standing at a mere four percent. 

00:58: Another observation: given the right wing media's hysterical calls for the nation to rally round May, they have clearly lost any moral authority. Nobody has taken a blind bit of notice of them.

00:44: Brief (I hope) outage. Not happy. Back online, I hope.  Results coming in are consistent in one thing - Ukip vote heavily down, but redistribution is not uniform. That makes a mockery of all those pundits who held that Ukip was not having an effect. I was writing about the "Ukip effect" in 2005, but the pundits were not on the ball.

23:25 Overall turnout high - said to favour Labour.

23:17: Sunderland (Houghton & Sunderland South) confuses. Labour, Bridget Phillipson: 24,665 - 59.5 percent (+4.4); Conservative, Paul Howell: 12,324 - 29.7 percent (+11.2), Lib-Dems, Paul John Edgeworth: 908 - 2.2 percent (+0.1); UKIP, Michael Anthony Joyce: 2,379, 5.7 percent (-15.8). UKIP polled 8,280 votes in 2015. It appears some, but not all, went to the Tories.

23:10: First result in: Newcastle Central - two percent swing to Labour. Labour, Chi Onwurah: 24,071 - 64.9 percent; Conservative, Steve Kyte: 9,134 - (+24.6 percent); Liberal Democrat, Nick Cott: 1,812 - 4.9 percent; UKIP David Muat: 1,482 4.0 percent.   Turnout 37,094 - 67 percent. Ukip nosedives: did 5,214 (14.9 percent) last time.

23:00: Times front page out: "May's big gamble fails".

: The exit poll does not cover Northern Ireland. The Irish vote could deliver ten or more seats to the Conservatives. Talk of the mainland vote, suggesting that the Ukip vote hasn't gone to the Tories. ITV pundit, talking of the Scottish vote, says "no-one saw this coming!" The big loser - apart from the Tories - could be the polls.

22:49: And the Lib-Dems are saying "no coalition". It's too early to speculate on this ... all the exit poll does for the moment is make sure we stay up a little longer. Right now, I'd like to see an uncensored interview with David Cameron. 

22:44: Out of interest, Lord Ashcroft's final estimate gave 373 seats to Conservative seats - an overall majority of 96. If turnout were to match that of the 2015 election, his model estimated 364 Conservative seats, or a majority of 78.

22:38: With no results in at all, there's talk of another election later in the year. Great speculation on which Tories are going to lose their seats. Rudd is said to be in trouble.

22:07: Off to a stonking start with a BBC exit poll which has the Tories losing their overall majority. They take 314 seats compared with Labour's 226 (up 34) and with the SNP taking 34 (down 27). The Lib-Dems get 14, the Welsh 3, Greens 1 and Others 18. Ukip is slated to get no seats.

The loss-making Guardian puts the "others" at 138 - accurate to the last. Margin of error is said to be 20 seats.

Richard North 09/06/2017 link

Brexit: an epic act of national self-harm


To judge from some of the detail in his latest article, Will Hutton has been picking up on some of the themes raised by this blog.

Every day in Britain, he writes, 14,000 trucks come from and head to the European Union. He then asks: If there is no Brexit deal with the EU, is every one of those trucks going to be inspected as they bring vital food and goods into the UK to see that the right tariff is being charged and correct regulation observed?"

Actually, Hutton hasn't quite got the point. Assuming food produced in the EU Member States remains subject to the normal regulatory regime, then it will be produced to the same standards that currently prevail in the UK (and presumably will continue to apply after we have left). Thus, the need for inspection on entry to the UK should be minimal.

He's on firmer ground when he notes that a quarter of British exports with the EU pass through one single port, Calais – £3bn a month – with zero border controls or inspection.

Who in Calais, he asks, "is going to inspect these goods to see if they correspond to EU rules if we crash out with no deal? Has France any interest in investing quickly in the customs structure to keep British exports flowing?"

Hutton goes on to assert that the M20 and M2 will become gigantic truck parks as drivers wait to be inspected. You might think, therefore – he adds:
… that just as a precautionary measure, as the prospect of the exit talks collapsing is less than two years away, the UK government would be investing in customs inspection depots in our great ports and along the land border with Ireland and also offering to build similar structures in France to ease the inevitable congestion on UK roads. Surely someone, somewhere might have asked these questions?
Such questions have, of course, been asked. They've been asked frequently on this blog and by Booker in his column. But, to Hutton, as one might expect, we are invisible – except when he wants to "borrow" precisely the points we, and only we have made (up to press).

But, just because he has only just discovered what we and many others outside the legacy media bubble have been talking about for months and years, that doesn't make Hutton wrong.

"Nothing is being done at all", he writes. "Mrs May and her breezy lead negotiator, David Davis, offer platitudes about Britain embracing the globe and no deal being better than a bad deal, but even the most innocent negotiator in the EU team can see this is vainglorious posturing".

Thus does Hutton speculate that: "They are betting on a deal being struck – negotiators with few cards, nor making sure they hold better ones". Nonetheless, he correctly divines that: "As matters stand, the consequence of no deal would be calamitous". By way of explanation, he adds:
For there are multiple areas where the same logic applies. It could be landing rights at EU airports or the export of drugs, suddenly to be treated as needing regulatory approval because they will come from a foreign country. There is the vast trade in dealing in euros in the City of London, surely certain to be repatriated to an EU member state. British universities will be barred from bidding for research grants.

Some 55,000 EU nationals work in the NHS: are they to return and who is to replace them? An estimated 5,500 firms in financial services hold 330,000 passports to allow them to sell financial products across the EU – one of our few successful exports – with no questions or inspections asked. Again, this privilege is about to go in under two years. Companies with multiple operations around Europe, including Britain, will find that freely moving parts, people and data suddenly cannot be done.
If he knew more about the subject, though, he would know that many of these problems arise from the EU leaving the Single Market. With or without a deal, we still revert to "third country" status, when customs controls and much else kick in. The "no deal" scenario is simply icing on the cake.

Even with a deal in prospect, though, Hutton recognises – years after we first came to that conclusion – that the necessary arrangements "simply can't be done within the time". Nor, he says, is any network of replacement deals going to be superior to the ones we already have.

One cannot therefore entirely disagree with Hutton when he declares that the Conservative manifesto commitment to leave the single market and customs union and seek a trade relationship outside any of the EU's frameworks – not the EEA or even Efta – is a declaration of economic war upon ourselves.

But he spoils it with his comment on the customs union. As always – in common, seemingly, with the totality of the chattering classes – he seems incapable of understanding that, when we leave the EU, staying within the customs union is not possible. But then, to understand that would require an understanding of the nature of the EU – and that is not within the grasp of that breed.

Nevertheless, we are not going to disagree with his concluding overview, that we are heading towards a first-order economic debacle. To this, though, Hutton appends an interesting codicil, telling us that, in Whitehall, morale is at rock bottom. Any civil servant who dares brief the prime minister or her inner circle on these realities is frozen out.

We have heard the same thing from a number of different sources, and even that senior (and well qualified) civil servants, in anticipation of the Brexit disaster, are seeking career moves which put as much distance as possible between them and any function which involves participation in the Brexit process.

If this is the case – and the reports are too pervasive and persistent to be entirely without substance – then this does lay the foundations for disaster. In the hands of ideologues and the inexperienced, we are setting ourselves up for a fall.

Hutton's big problem, though – shared by us all - is that if the Conservatives are removed from the negotiations, we end up with Keir Starmer, Emily Thornberry and Barry Gardiner, together with Angela Smith, the current leader in the House of Lords. It is a measure of the desolation of Labour's position that these people are considered to be "talent".

However, there is no denying that the Labour Manifesto makes far more sense than Mrs May's effort, recognising that "leaving the EU with 'no deal' is the worst possible deal for Britain and that it would do damage to our economy and trade". Says the Manifesto, "We will reject 'no deal' as a viable option and if needs be negotiate transitional arrangements to avoid a 'cliff-edge' for the UK economy".

If the Conservative Manifesto said the same things, there would be no contest, but not only does it endorse the "no deal" strategy, it also fails to mention transitional arrangements.

Short of a "walk out", the only option available to UK negotiators after settling the three preliminary issues (difficult in themselves), is to abandon any attempt at settling a free trade agreement and to focus on a tolerably acceptable transitional agreement.

While Hutton thinks Britain will have to accept whatever the EU offers at whatever price, this was always going to be the most credible option and, provided that we have actually left the EU, that gives us our best chance of avoiding caving in to the EU.

Much of the leverage available to the EU stems from the "cliff edge" time limit, and once that is removed, the EU loses most of its power. If we can keep trading with EU Member States on tolerable terms long enough to extend our regional and global reach, then Brexit does not have to be that "self-harm" that Hutton predicts.

Richard North 05/06/2017 link

Brexit: UK suffers most


Mrs May was in York University yesterday evening, alongside but not confronting Jeremy Corbyn as they continued with this charade that passes for a general election campaign.

Of what the Prime Minister did say, very little was memorable and, of that, we'd mostly heard it before, leaving the media thin pickings. The news agency Reuters was thus left to reiterate Mrs May's defining position, telling us that she was confident that Britain could get a good deal in the forthcoming negotiations, but would be prepared to walk away without an accord on departure terms if necessary.

In terms of the precise quote, we have her saying: "I've said that I think no deal would be better than a bad deal. Now I'm confident we can get a good deal with the right plan for those negotiations, because I think a good deal is in our interests and in the interests of the rest of the EU".

She then adds the money quote, saying: "But we have to be prepared to stand up for Britain. We have to be prepared to go in there, recognising that we're not willing to accept a bad deal".

At this stage in the campaign, with less than a week to go, it is too late to expect any fundamental change in position so, for better or worse, we're stuck with this from the Conservatives – and this alone will be enough to induce some people not to vote for this party.

Not voting for the Conservatives, though, does not necessarily mean transferring to Labour, and some may even consider returning to Ukip – where there is a candidate standing.

I even briefly considered that possibility, until I saw the leaflet which came thought my letter box yesterday. It did not mention the European Union anywhere in the text, and there was only one short sentence devoted to Brexit: "Challenge the Tories on Brexit and demand that Brexit really does mean EXIT".

That simply isn't good enough for a party that came into being to fight for our withdrawal from the EU. It has lost its way and is no longer part of the fight.

Meanwhile, almost completely ignored by the legacy media (for the moment) is a study on the effects of Brexit on the German and European economy, commissioned by the (German) Federal Ministry of Economics and Energy from the Ifo Institute in Munich.

One of the key findings suggests that Brexit "will definitely be much more expensive for the UK than for Germany", although the precise costs will vary according to the nature of the final agreement. In the event of an EU-Korea style of agreement, the Institute calculates that real GDP in the UK will decrease by 0.6 percent, compared with 0.1 percent in Germany and 0.11 percent in the EU 27.

In the worst-case scenario, losses in the United Kingdom would be 1.73 percent of GDP over the long term, Germany would lose 0.23 percent and the EU 27 would average a 0.26 percent loss. In four "hard" Brexit scenarios modelled, the UK's relative loss is at least five times the EU average. In the "soft" Brexit scenarios modelled, it is at least four times as high.

From the point of view of Germany, therefore, its economy is relatively untouched by Brexit, while the UK comes off worse across the board. One might suspect, therefore, that any attempt by UK negotiators to suggest that there will be equality of misery will not be taken seriously.

Nevertheless, there are distinct variations in effect throughout the EU. Among the large EU members, Germany is the country which suffers the largest losses in all scenarios, both in percentage and absolute terms.

Where Germany's GDP drops in one scenario by 0.24 percent, France gets away with a drop of 0.2 percent, while Italy and Spain take a maximum hit of 0.15 percent.

However, a number of smaller EU Member States who are relatively badly affected. In all scenarios, Ireland suffers slightly more negatively than the UK itself. Malta and Cyprus, two countries traditionally strongly united with the UK, would also lose significantly. The Scandinavian countries, and the Benelux countries, above all Luxembourg, would lose above average amounts.

Within different sectors, there are also graduations in effect. In Germany, pharmaceutical, motor vehicle and machinery industries would lose the most, in the worst case respectively by 2.9, 1.0 and 0.6 percent.

In the financial sector, Germany could gain slightly, but the potential value-added effects are small in all scenarios. In the best case, the increase is 0.7 percent (around €500 million). Other service sectors tend to be losers, although the negative effects are very close to zero.

In the UK, though, the Institute thinks that the industrial sector is likely to suffer long-term damage. In some sectors, such as in the motor vehicle or aircraft construction, these sectors might experience falls between two and ten percent. In the case of easily substitutable metal products or chemicals, the losses could be even more pronounced, in the worst case, up to 18 percent. In the food sector, losses of five percent can be expected.

The UK's service sector would also suffer from Brexit. Interestingly, though, the financial and insurance services would not suffer the most. These are protected by strong comparative advantages. In the wholesale sector, in the field of engineering, and in certain business services, losses could amount to seven percent in the worst case.

Through this study, though, the Germans are looking at long-term effects. And while these are bad enough, over the short-term they could be considerably worse.

Furthermore, the Institute deals with non-tariff barriers by attributing a notional 15 percent ad valoram penalty. It does not factor in delays and disruption to trade, or the effects of regulatory barriers (such as in the pharmaceutical sector), which force relocation of enterprises, or which prevent trade altogether (as will be the case with meat exports from the UK unless there is substantial investment in Border Control Posts).

From this stance, therefore, the German study is under-estimating the effect of a "no deal" scenario, where the UK's "Team Brexit" walks away from the Article 50 talks.

Perhaps it is because of the unreality of such a scenario that there seems to be so much difficulty modelling it, and thus putting a realistic figure on the cost of walking away. But even from the current, limited survey, the EU can take assurances that they will be substantially less damaged than the UK.

That in itself could make the EU less responsive to the UK, and thereby make a "walk-away" that much more likely, as the EU negotiators fail to respond to UK pressure.

Certainly, the survey doesn't entirely support the argument that a "good deal" is necessarily in the interests of the rest of the EU. In fact, what the EU takes as a good deal may be very different from the UK's ideas, which means that the two sides could end up talking past each other.

On the other hand, if she took on board the survey, Mrs May might realise that she needs to step back from her facile mantra. The indications are that the EU will be entirely indifferent to her "walk-away" threats, and unconcerned by the prospect of the slight economic damage that might be caused.

"UK suffers most", needs to be her watch words. It would help better to shape the negotiations.

Richard North 03/06/2017 link

Booker: election manifesto whiffle


In his column this week, Booker's main focus is what he calls the "climate change whiffle" in the Conservative Party Manifesto.

That manifesto, it has been observed, is long on grandiloquent assertions and pious aspirations, but short on detail – and nowhere is this more obvious than on one of the potentially most disastrous problems confronting us: our hopelessly skewed energy policy, and how we can keep our lights on.

However, never let it be said that energy and Brexit are competing for the title of the most hopelessly skewed policy. At best, it's first amongst equals, in which case it hardly matters which one takes the top slot.

With that in mind, we thought it might be a good idea to carve parallel tracks. While Booker does "climate/energy" and the manifesto, I would revisit the manifesto's offering on Brexit, adding to my earlier piece.

Coincidentally, though, we have Matthew Parris in The Times, who writes under the headline: "May won't say it but Brexit is all that matters". Looking at the manifesto, and then Parris, it seems to me, would make for a useful commentary.

Turning to the manifesto, it certainly starts well, with a personal message from Mrs May. She states that: "The next five years are the most challenging that Britain has faced in my lifetime", then adding:
Brexit will define us: our place in the world, our economic security and our future prosperity. So now more than ever, Britain needs a strong and stable government to get the best Brexit deal for our country and its people. Now more than ever, Britain needs strong and stable leadership to make the most of the opportunities Brexit brings for hardworking families. Now more than ever, Britain needs a clear plan.
Yet, for all that, Brexit is offered only as number two of "five giant challenges", the first being the need for a strong economy. But, with "Brexit and a changing world", we are told that we need "to deliver a smooth and orderly departure from the European Union and forge a deep and special partnership with our friends and allies across Europe".

As for the detail, in the 560 words awarded, you might have thought that, since Mrs May had stressed the need for a "clear plan", some space might have been given to defining the Conservative version. This was not to be.

We are told that only the Conservative Party, under Theresa May's "strong and stable leadership", can negotiate the best possible deal for our country. We are reminded of the "twelve principles" the prime minister laid out her Lancaster House Speech, and of her intent to seek "a new deep and special partnership with the European Union".

Of this partnership, it is claimed that it will benefit both the European Union and the United Kingdom. We are told that the negotiations will undoubtedly be tough, and there will be give and take on both sides. And "we continue to believe that no deal is better than a bad deal for the UK".

The Government, we are assured, will enter the negotiations in a spirit of sincere cooperation and committed to getting the best deal for Britain, and it will make sure we have "certainty and clarity" over our future, control of our own laws, and a more unified, strengthened United Kingdom.

As one might expect, the manifesto pledges to control immigration and secure the entitlements of EU nationals in Britain and British nationals in the EU. We will, it says, maintain the Common Travel Area and maintain as frictionless a border as possible for people, goods and services between Northern Ireland and the Republic of Ireland.

When it then comes to the so-called "divorce bill", there is even a flash of realism, with an acknowledgement that "there may be specific European programmes in which we might want to participate and if so, it will be reasonable that we make a contribution.

We will, says the manifesto, determine a fair settlement of the UK's rights and obligations as a departing member state, in accordance with the law and in the spirit of the UK's continuing partnership with the EU. But, it adds, the principle is clear: "the days of Britain making vast annual contributions to the European Union will end".

However, if at this late stage, the manifesto was beginning to drift vaguely in the direction of reality, in its closing statement – after an appeal for "fair, orderly negotiations, minimising disruption and giving as much certainty as possible" – it veered sharply away and headed at warp speed for an alternate universe.

"We believe it is necessary", it concluded, "to agree the terms of our future partnership alongside our withdrawal, reaching agreement on both within the two years allowed by Article 50 of the Treaty on European Union".

That Theresa May's Conservatives believe that we can, in effect, conclude a free trade agreement within the period left under Article 50 is nothing short of fantasy – pure, unmitigated fantasy, with not the slightest concession to the real world. And, as befits this entirely imaginary construct, there is not the faintest whiff of a plan.

At this point, we can bring in Matthew Parris, the former MP with a reputation for writing self-serving drivel, but with the capacity occasionally to write with a flash of insight.

Displaying that increasingly rare insight, he notes that, while "we sail almost silently onward towards the biggest, hardest negotiation our country has faced in my lifetime", nobody speaks on Brexit. Theresa May, Parris says, is all but struck dumb. The Labour Party is muted, trying to avoid an argument about whether it even wants this to happen. The Lib Dems, led by a glorified bingo caller, duck behind the cover of a hoped-for second referendum.

"Will nobody talk about Brexit?", he asks. "Are we to enter the polling booths in 12 days with the biggest question all but undiscussed, still hanging above our country? It would be like conducting a British general election in 1938 without mentioning the Third Reich".

Whether Leaver or Remainer, surely we can both agree on the need to examine what we should now be aiming for. There are questions such as, what's to happen to farming? Parris continues:
Will there still be subsidy, and how targeted? Food imports: is protecting our farmers a red line in trade deals we hope to negotiate with food-exporting nations? The City? Is getting a special deal on equivalence in financial rules a priority? How about immigration once we've taken back control? We make country-by-country rules, and will for the EU as a bloc. Any thoughts, Amber Rudd? Don't business, the City and farming need to know before they vote? What analysis has been done (or planned) of the costs to our economy of migration limits?
It's not enough, Parris adds, "for Theresa May to say we'll keep the 'soft' border with the Republic of Ireland. How? This is desperately important". If we want to stay with Europol, the European arrest warrant, the Schengen information system, how do we reconcile this with the European Court of Justice's jurisdiction? Does the Manchester atrocity affect priorities? Have we assessed the costs of setting up new bureaucracies if we leave EU regulatory agencies on medicines, competition, aviation safety and the like?

These and many other questions are capable of discussion now, Parris avers. Of course the British government can't fully "reveal its negotiating hand" but major insistences (leaving the single market and customs union) and major concessions (paying our fair share of the bill for divorce) have already been announced. These have consequences.

Then, in the key "money quote", he writes: "Both major parties owe the electorate a look-in on their thinking about how to approach them".

Thus does the man conclude that "we're being infantilised as a democracy". May needs to break out of an impression of haplessness that can only feed itself if she goes silent. How better, twelve days before this country's last chance to vote on Brexit, than by a fireside chat in which she trusts us with her thoughts? Or, Parris ventures, "is the cupboard bare? People will begin to wonder".

In that final statement though does he reveal his own narrowness of vision. There are those in the community – many of them to be found here – who already suspect that the cupboard is bare. Parris and the rest of the country are beginning to catch up.

And on that thought, I will promote manifesto whiffle on Brexit to the top slot. However important climate and energy policy might be, Brexit is make-or-break. And the Conservatives seem determined to break the system, taking this country down with it.

Richard North 28/05/2017 link

Brexit: aviation imponderables


Predictably – and entirely as predicted – the UK media have largely given up on Brexit. No doubt, what passes for normal service will be resumed in due course, along with what's left of an uninspiring general election campaign.

Of the English-language press, that leaves the Irish carrying the torch, with RTÉ News flying the flag for its favourite son Michael O'Leary, Ryanair chief executive.

O'Leary was holding forth on the British prospects for Brexit, asserting that the "political imperative in Europe" is that the British will "suffer on the way out the door". He believes there will be a hard border with Northern Ireland and no free movement of people. The common travel area will also come under severe strain.

His view was that "you cannot have Britain be seen to leave the EU and not suffer". British people, he said, are deluding themselves because they are only talking to themselves and reading UK newspapers with a constant diet of "utter rubbish" about how they will negotiate a great deal for Britain.

As one might expect, he is concerned for the future of his business, worried that the UK is taking itself out of the "Open Skies" arrangements with the EU – the thrust of my piece in January. But O'Leary is racking up the pain, telling us that, after March 2019, there could be a period where there are no flights to the UK. People here might have to go back to "using the boats", he stated.

This may be an exaggeration but the way Mrs May is playing it - alongside David Davis – talking up the "no deal" scenario, is one sure way of making it happen. Unless there is a formal EU-UK agreement to replace the internal EU arrangements that currently apply, things are going get sticky.

As it stands, we have no information on how matters can progress, even if options are limited: the UK can either agree a stand-alone bilateral access agreement, or it can seek a wider-ranging free trade agreement with an aviation component.

But there other serious issues to resolve. Here, I'm reminded of a piece I wrote in July 2014 about the EU's external aviation policy, through which the EU has taken over the responsibility on behalf of all Member States for concluding agreements with third countries. Thus, when the UK leaves the EU, all the other external agreements fall. That includes those with the United States and all other countries in the world.

What is particularly disturbing, though, is that we have no idea of what the UK government has in mind when it comes to replacing these deals. It is not even clear whether we can conclude new deals until we have left the EU.

With such an important industry, where any disruption will have a huge impact on the travelling public and the economy, we should not be guessing. By now, there should be a clear outline of policy and a degree of certainty. Instead, we get reports such as this which records what amounts to a political vacuum.

This leads Andrew Swaffield, chief executive of Monarch, the holiday charter airline, to observe that we could end up with higher air fares, less choice and possibly even a return to 1970s air charter days. "Fares will gradually go up and there will be less competition", he says.

But if O'Leary has it right, these are the least of our worries. The potential for catastrophic disruption is not academic. For sure, we all expect the new government, most probably led by Mrs May, to deal with this issue. But we have had absolutely nothing bankable – in fact, nothing at all – which would suggest that the situation is under control.

Nor is this made easier by developments in EU policy. At the end of 2015, it published its Aviation Strategy for Europe outlining plans that extend to 2019, which include significant revisions to existing legislation.

On top of this, the Commission in 2016 was authorised by the Council to open negotiations in order to conclude bilateral air safety agreements with third countries (China and Japan) and EU-level aviation agreements with the Association of Southeast Asian Nations, Turkey, Qatar, the United Arab Emirates and Armenia.

For the EU, therefore, aviation policy is very much work in progress. Brexit can only be an unwelcome complication, requiring it to open up complex negotiations with the UK. On the other hand, the UK must open negotiations with the rest of the world to make its own access agreements.

Here, it gets even more complicated. The current EU policy stems from a 2002 ECJ ruling that bilateral aviation agreements of Member States with third countries were in breach of fundamental provisions of the EU Treaties. The intervening fifteen years have led to the current policy matrix, with a network of international agreements, of which the UK is part.

Such agreements are based on reciprocity, with the EU able to leverage UK access in brokering terms with third countries. Without the UK's weight, the EU may have to renegotiate some if not all of its third country deals. In other words, the entire international aviation settlement is at risk of unravelling.

Oddly, that gives us some leverage of our own. There is no gain for either the EU or the UK in disrupting current arrangements. So, as long as the UK is prepared to re-adopt relevant EU regulation – and commit to taking on board the revisions and additions as they arrive – and as long as the EU is prepared (and able) to revise its own internal arrangements, then the status quo will prevail.

This will require the EU to amend its own law to allow UK, as a third country, to operate "community airlines", allowing them to benefit from the third country agreements already in place. But that means, we will remain bound to the EU and have no more autonomy on aviation policy, post-Brexit, than we do now.

Then we also have to factor in Air Traffic Management and the Single European Sky, about which next to nothing has been written. Yet this 18-year-old programme must be revisited in detail.

For there to be continuity of commercial aviation services (freight as well as passenger traffic), all these complications will have to be addressed and resolved within the space of less than two years, allowing time within that period for the EU to produce and bring into force amendments to legislation which normally take many years to prepare.

Recently, Michel Barnier in his speech to the Irish Parliament warned that air connections between the UK and EU could be "severely hampered" if Brexit goes wrong. That might be something of an understatement.

Bluntly, even with the best will in the world, with all parties focusing on the problems and devoting all the necessary resources to resolving them, getting the arrangements in place for Brexit would be a considerable stretch. Yet all the indications are that the issue is not even formally on the agenda.

Quite often, I am accused of undue pessimism on Brexit, but I can only call it as I see it. Clearly, there are complicated issues to resolve, and when the chief executive of a major airline starts talking of international flights shutting down, we really need to listen.

Some of this may be hyperbole but no one can accuse the international trade body, IATA, of such a sin. The day after the referendum, it noted warnings that, given the complexity and scope of the negotiations, the 24 months allocated "would likely be insufficient time to complete all the necessary processes".

Months into the negotiation period, the threat of massive disruption is intensifying. And when aviation doesn't even appear to be on anyone's agenda, it is time to get very worried.

Richard North 25/05/2017 link

Brexit: breaking out of the inner circle


During the height of the Troubles in Northern Ireland, I recall some serious discussion about whether there should be a complete block on high profile publicity on bomb outrages – on the basis that to afford them front page headlines and huge media coverage was to give the terrorists exactly what they wanted.

Something of that argument carries over into the dreadful incident in Manchester, late on Monday, the news of the incident and its aftermath driving other news out of the media, with even general election coverage suspended.

The essence of terrorism is that it is a grotesque form of attention-seeking. If we let them, this murderous freak in Manchester and his co-conspirators are going to have more effect on the outcome of Brexit than a thousand or more pundits and politicians, simply by virtue of their closing down the public debate.

These people seek to disrupt our way of life, to create an atmosphere of tension and crisis and to distort and channel our politics, all so that we should conform with their agendas. Therefore, an essential response to terrorism is to attempt, as far as is possible, to carry on as normal.

But, as Pete remarks, media incontinence and the inability to focus on more than one subject at a time, means that Brexit will be buried even further. Already, in this election, this pivotal issue is woefully neglected and the media need little excuse to chase after issues that are easier and more rewarding to report.

Unwittingly, therefore, the media is doing the terrorists' bidding, something that we are unwise to allow. Thus, we must, with due respect and deference to the dead and injured, press on with an issue which is vital to the long-term prosperity of the UK, an issue which will shape our politics for generations to come.

Right up front in this department is the extraordinary mess Mrs May seems to be making of her election manifesto, and the apparent U-turn over the so-called "dementia tax". The elements of this have enormous relevance to Brexit.

To help understand this, we can go to The Times (behind the paywall) and a piece headed: "May's flaws are now exposed for all to see". Here, we see Rachel Sylvester write:
Mrs May, prizing loyalty over knowledge, relied instead on her small, close-knit team of advisers who appear to have failed to understand the basic issue. Even the cabinet was not consulted on this critical policy, which was reportedly inserted into the manifesto at the last minute by Nick Timothy, the prime minister's chief of staff.
Sylvester then goes on to say: "None of this bodes well for difficult Brexit negotiations that will require flexibility and empathy as well as determination if she returns to Downing Street".

"The problem", she says, "is that it's part of a pattern. Only a few weeks ago the prime minister had to abandon the key budget announcement about a rise in national insurance for self-employed workers because she and her team had apparently failed to spot that it clashed with a manifesto commitment made by David Cameron".

The complaint is one of "tunnel vision in No 10" that prevented political perception. At the Home Office, where Mrs May also relied on her inner circle, says Sylvester, "she ignored all appeals by her cabinet colleagues to take students out of the net migration target, despite the damage the policy was doing to universities".

Even though she repeatedly missed the pledge to bring the number of immigrants down to the tens of thousands, she stubbornly insisted on repeating it in her own manifesto.

In the view of the Times columnist, looking inwards not outwards makes for bad policy and ineffective government. The Tory manifesto, she says, is starting to unravel. The prime minister needs to learn to listen to those beyond her core team if she wins on 8 June or she will quickly see her premiership doing the same.

Unfortunately, Brexit is a central part of the manifesto and, as other policy areas seem to be unravelling, Mrs May seems to be hardening her approach to Brexit, relying on what she thinks is a popular policy to salvage her tarnished reputation.

In so doing, she is supported by the Brexit cult within the Conservative Party which, as Pete remarks, is in the process of convincing itself hat there is no cliff edge. And like Mrs May's own political process, they seek to do this through obfuscation and denial, building up an elaborate belief system based on a number of self-deceptions.

The latest manifestation of this is in Conservative Home where the spectacularly moronic Christopher Howarth joins his fellow Tory Boys in a thoroughly dishonest attempt to support the WTO option. Howarth, of course, is Steve Baker's gofer and the researcher for the European Research Group, that group of Tory "Ultras" dedicated to pursuing a "hard" Brexit.

Thus does Howarth argue that: "The US trades with the EU under WTO terms, but that does not mean that the US has no agreements with the EU", thereby completely misrepresenting the WTO option. Necessarily, as we've pointed out on numerous occasions, not least here, The WTO option arises from unilateral action taken by the UK. The moment you broker side-agreements to supplement the basic WTO rules, you are no longer dealing with the WTO option. The unilateral becomes bilateral.

But this is how you win arguments in Tory land. You change the definition of the terms, to give them your own unique meaning which happens to suit your personal requirements. By that means, adopting the WTO option does not involve driving over the cliff edge, because you've just redefined it.

Exactly the same game was played by Lee Rotherham, who asserted that: "What people forget is that what are referred to as 'WTO terms' are accompanied by a range of other agreements that build on them and further facilitate trade".

By such sleight of hand, it is possible to win any argument, demonstrating also why it is fruitless arguing with a Tory. They live in that alternate universe alongside Mrs May, the presence of which so frustrated Jean-Claude Juncker. This is a universe where black is white and the unilateral "WTO option" is miraculously converted into a series of bilateral agreements.

Unfortunately for Mrs May, should such arguments be taken to Brussels, they will be tested under hostile conditions, outside the warm, comforting embrace of Conservative Home, where the arguments are won before writers even put fingers to keyboards.

In this very different reality, the argument is not necessarily going to be any better but it is not going to buy into the cloying conformity that binds the Tory clique. The UK's "Team Brexit" is going to be fighting for its life and, with arguments that find such an easy resting place in CH, it is going to lose.

If we're to avoid a plane crash Brexit, Mrs May is going to have to realise that she cannot rely on her "inner circle". She will have to break free from the grip of inbred Tory stupidity and listen to something that has a half-life of more than nanoseconds outside the closeted environment of the Torygraph, the Daily Mail and CH.

Failing that, she will deliver a plane crash Brexit and, with that – as Sylvester warns - she will quickly see her premiership unravel.

Richard North 24/05/2017 link

Brexit: business fears


Pete, in his recent blogpost features the self-important Chris Grey, who happens to ask exactly the questions many of have been asking, and for some time.

For instance, he asks in respect of Brexit: where is the detailed discussion of different options and their consequences, to which he adds several more: What exactly does the government's White Paper Brexit plan, endorsed in the Tory manifesto, mean? Is "no deal better than a bad deal"? How would a "bad deal" be defined? What does a "no deal" scenario look like?

What Grey finds most extraordinary of all, though, is the lack of discussion on the costs of the Brexit plan. Every single other policy, from whatever party, is relentlessly scrutinised for affordability, he says, but not this one. "How will this or that spending pledge be paid for? ", he asks.

So obvious are such issues that similar thoughts have even occurred to Telegraph columnist Juliet Samuel. She notes – as others have done before her – that anyone hoping for a detailed picture of Brexit the Mrs May's manifesto will be disappointed. Our Prime Minister has stuck resolutely to her favoured strategy: reveal as little as possible and maintain maximum room for manoeuvre.

This leads Samuel to the equally obvious conclusion that it's impossible to know what the Brexit negotiations will bring. "The government", she writes, "is determined not to show its hand any sooner than it has to", adding: "If that leaves EU negotiators in the dark it also, unfortunately, leaves voters in the same place".

And much the same sentiments have occurred to Booker who, in this week's column also records that the Conservative manifesto told us nothing new about the Government's Brexit plans, other than repeating the promise of a "smooth, orderly" withdrawal.

Scarcely a day now goes by, he adds, without further signs of how difficult this may be to achieve, reinforced by Angela Merkel who told a G20 trade union conference last week that it would be up to the British to work for a settlement that would cause "the fewest possible distortions" to trade.

But it is not only the pundits who are reacting to the strange political vacuum represented by Mrs May's moribund manifesto. Last week also, as Booker records, there was a "startling report" from the international body representing all those firms whose products are dependent on components imported from other countries.

This was a survey of 2011 UK and European supply chain managers by the Chartered Institute of Procurement and Supply (CIPS). It found that, thanks to our decision to leave the Single Market, almost half the European firms reliant on British suppliers are so fearful of the new "customs procedures and regulatory hurdles" this will bring that they are already arranging to source those products on the continent.

Of British firms reliant on parts imported from Europe, 32 percent are likewise looking for alternative suppliers in the UK (of all cars made in Britain only 41 percent of their components are currently sourced in the UK). As the institute's president put it, "the separation of Britain from Europe is well under way".

This, in its own way, constitutes a vote of no confidence in the Prime Minister – one shared by many enterprises in the City of London, where international banks, such as JP Morgan, are quietly making preparations to move part of their operations to the continent.

But, says Booker, businesses have only been waking up to all these potential problems since January, when Theresa May announced the reversal of her earlier insistence that Britain would remain "within" the European market.

By choosing instead to leave the Single Market, Mrs May is opting to have the UK become what EU rules classify as "a third country". This status makes it inevitable that we are caught by all those new "customs procedures and regulatory hurdles" which so many businesses in Britain and Europe are now contemplating with such concern.

This is why we learnt last week from the Frankfurter Allgemeine Zeitung of a warning from the council of advisers to Germany's economics ministry that there is "little chance of a sufficiently deep agreement being concluded by the planned exit date of 2019".

The only way to "minimise disruption", they say, would be for Britain to join Norway in the European Free Trade Area, an option which Mrs May has already ruled out.

And gradually, the consequences of that decision are coming clearer. In Ireland, for instance, the sharpest cry of alarm yet went up last week from its racing industry, worth £1 billion a year, which depends heavily on its freedom to move 200 horses a week to race in Britain and back again.

Its spokeswoman recalled that last year Cheltenham had 19 Irish-trained winners, along with a third of those at Royal Ascot. She fears that new controls requiring "valuable horses to remain in horse boxes for prolonged periods at border checkpoints" would, on welfare grounds alone, make it difficult for this to continue. But Britain, she said, had so far shown no sign of needing to address this problem at all.

Much of all this concern has only arisen, of course, because of the huge cloud of uncertainty over what Britain will actually be seeking when the talks begin in Brussels next month.

It is one thing to offer bland assurances that we are hoping for a "smooth, orderly" withdrawal. But for many the strain of waiting for the details on which their livelihoods depend is becoming hard to bear. More to the point, the potential damage from a "botched Brexit" is so great for some firms that they must take precautions in order to protect their operations.

Not all of this is necessarily bad. As this report indicates, the Swedish furniture retailer Ikea is considering making more products in the UK in order to help offset risks from importing goods.

That other companies are looking at this option is confirmed by CIPS and, depending on the volume of trade substitution, this type of arrangement could have a significant effect on offsetting export losses.

The thing here is that we have no way of knowing what the balance will be. This is the gift Mrs May has bestowed on the nation. Where there could have been clarity and purpose, we have confusion and uncertainty. Small wonder, business fears are increasing, as is the case with any sensible person trying to find a way forward.

Richard North 21/05/2017 link

Brexit: playing for high stakes


Following the front-page euphoria in the Mail on Mrs May's election manifesto, it was rather amusing to see a Twitter comment to the effect that, if May announced slaughter of the firstborn right, the paper would describe it as a boon for overstretched parents.

Certainly, we've seen nothing unduly critical about the Brexit aspects from the media generally, much less the Mail in the wake of the manifesto publication. It took Chris Johns of the Irish Times, therefore, to note that the manifesto was "strong on economic illiteracy".

By and large, it is still the Irish who are making the running on Brexit news, with the Irish Times also in the frame, recording, amongst other things, the exploits of Taoiseach Enda Kenny.

He was in London yesterday addressing people at the Ireland Funds of Great Britain's City lunch, telling them that his Government would seek to protect the interests of Northern Ireland, warning that a hard Border was "unacceptable".

"My Government", he said, "has sought to protect the interests of the island as a whole in its extensive preparatory work on Brexit and will continue to advocate very strongly for Northern Ireland’s interests to be protected". But, he added, "it is important to recognise that the UK leaving the EU changes the context and presents very real challenges to us on the island of Ireland".

Meanwhile, the "fantasy land" we noted in our earlier piece is still very much in evidence. Under the title: "New Border: 'Cars being stopped and searched isn't going to happen'", this piece in the Irish times has a senior Irish revenue official saying border controls could be automated, allowing checks to be made "without customs points".

This is from Tony Buckley, the assistant secretary in charge of customs, who says the new plan will involve a type of self-assessment and audit regime, possibly with, for convenience reasons, service offices close to the border. But the regime can be automated and simplified and does not need customs points with Northern Ireland.

All this illustrates an absolute determination to play down the potential impact of Brexit, but also with an element of a straw man argument. For instance, no one is seriously expecting the Common Travel Area (CTA) to be junked, so the prospect of private cars being stopped and searched at the border was never really on the cards.

Buckley was asked if he envisaged a system such as the one that exists between Norway and Sweden, to which he responded that that border involved delays of approximately 15-20 minutes for trucks, adding: "We're looking at that in seconds".

Because a border would be being "built from nothing", Buckley said, there was an opportunity to use very sophisticated tracking and surveillance systems that satisfied the EU, managed the risk, and achieved the Government’s objective of a "very soft borer" (sic).

The new regime, he admitted, would probably give rise to temporary criminal and economic issues that would have to be dealt with. However, he said, overall Ireland has two big advantages in terms of dealing with the new situation. The Republic's trade with Northern Ireland is only two percent of all exports, and Ireland is an island at one end of the EU without another land border. If something comes into Ireland, it is in Ireland and that's it, he said.

Why this strikes as fantasy is that the border with Norway and Sweden is between a fully-fledged EU Member State and an Efta/EEA state, with an established agreement on customs cooperation. Nothing like this exists at any land border between an EU state and a third country. To suggest that the EU can (or will) instantly approve a system far in advance of anything that currently exists in the EEA is truly dreaming.

Not least, as Angela Merkel has recently reminded her own people, the European Union needs to guard against the U.K. gaining an economic edge by easing regulation when it leaves the bloc.

That apart, the real issue at the border is not private cars but commercial traffic: all such vehicles would have to be monitored. But the current Border has approximately 300 crossing points, with one million heavy and 1.3 million light-goods vehicles crossing each way each year.

An automated regulatory system would require automatic number recognition, with gantries at each crossing point. It would we totally unrealistic to expect all of 300 crossings to be kitted out. Some restrictions on the number of crossings would be inevitable.

Then, there will be a significant number of physical inspections, with the volume being constantly under-rated. Even if deferred inspection was allowed (and there is no reason why it should not be), the number of inspection points would be limited. A considerable amount of traffic would have to be diverted.

The crucial issue, though, is not the technology but the nature of the agreement between the EU and the UK. And with Theresa May still talking about a "no deal" scenario, that leaves the possibility of a hard border, with no concessions to speed up the flow of traffic.

As an aside, the implications of a hard border between North and South are so horrendous that one could hardly envisage any sane government allowing it. But if that is the case, it makes a mockery of Mrs May's "no deal" threat.

Despite this, we have Buckley and friends saying that parties moving goods across the border would have to lodge documents with the two customs authorities, which they would put into a computerised risk-assessment system, thereby facilitating rapid processing of clearance documents.

But the point we've made before is that any sharing of computer data will require the UK to conform with EU data protection rules – and then for electronic systems to be compatible. Neither is assured. Nor can it be assumed that the existing authorised economic operator system will necessarily carry over. This will depend on the outcome of negotiations and full conformity with data protection rules.

There is, however, no end to the Buckley fantasy. The practical difficulties of searching 40ft refrigerated trucks along the Border, he says, was not something anyone wanted to contemplate. "So let’s not do it", he declares – as if that was a solution.

Whether a facility such as a Border Control Post is on the border, or a few miles from it is neither here nor there. Being required to divert traffic through the BCP is the problem.

The bigger problem, though, seems to be the institutional ignorance and unwarranted optimism we're getting from officials. No one is going to suggest that the technical problems are not insoluble. Given the political will between the parties, a satisfactory arrangement will be concluded. But simply to pretend that these problems do not exist is the height of foolishness.

Nevertheless, there is one area where Buckley has it right. If Ireland fails to operate an adequate EU external border, he says, it could compromise Ireland's position in the EU market and maybe with the whole world, he says. "So we are playing for very high stakes".

Never were truer words said.

Richard North 20/05/2017 link

Brexit bullshit


In a classic example of the power of prestige, the BBC is quoting the head of Ireland's customs authority, who is stating that [only] up to eight percent of freight crossing the border will have to be subject to checks after Brexit.

This is Revenue Commissioner Liam Irwin who has been giving evidence to the Irish parliament's finance committee, whence he said that the authorities would try to minimise customs controls but they are required under EU law. On that basis, he argues that this would mean checks on 6-8 percent of freight, mainly on documents but with a "small number" of physical inspections.

Furthermore, Irwin says, checks would not happen at the border but at "trade facilitation posts" which would be "10 or 15 kilometres back from the border". He adds that there would also be some form of random, or risk-based, customs checks carried out by mobile units.

In the Commissioner's view, customs declarations would be made electronically and most transactions would be immediately approved. There would not be a return to a pre-1992 situation when there were customs posts at the border.

Bizarrely, the man then goes on to admit that Irish customs authorities are not currently in "any form of discussion" with the UK, which rather negates his earlier comments. At best, these could only be considered aspirational, dependent on the nature of the agreements on customs cooperation between the UK and the EU.

Not least, when it comes to customs declarations, the ability process these depend intrinsically on the degree of cross-border exchange of data which, in turn, will depend on UK conformity with EU data protection rules. This is currently open to question.

Then, Mr Irwin seems to be neglecting entirely the problem of conformity assessment, to which extent he must be presuming that the UK and the EU will be able to conclude a mutual recognition agreement (MRA). Without such an agreement, one would expect physical inspections (and specialist testing) of goods coming into Ireland from the North vastly to exceed a mere eight percent.

And this, of course, does not take into account the cross-border movement of livestock, agricultural goods and foodstuffs, which must be subject to veterinary or phytosanitary checks before they can even be submitted for customs clearance. For live animals, inspection rates can be 100 percent, while the rate might vary from 10-50 percent for the physical inspection of foodstuffs.

There is a way round this – what amounts to the "Swiss option". But this would require the UK to comply fully with EU animal health and food law, and all other relevant law, as well as carrying out full EU-style checks on imports from third countries.

For these sectors, the net effect would be the same as if the UK had never left the EU, with the proviso that the "fax law" jibe would come true. The UK would have to comply with EU law, with no direct input in its making – notwithstanding that many of the standards underwriting the law originate at global level.

What precisely businesses will have to plan for, therefore, depends on the level of agreement between the UK and the EU – nothing of which can be taken for granted. When it came to Irwin's presentation, it was perhaps just as well that Sinn Féin's Pearse Doherty questioned whether talk of an invisible border was "fantasy land stuff" as nowhere in Europe had such arrangements.

Despite that, Michel Barnier was in the European Parliament yesterday for a debate on Brexit, when he urged businesses to "move fast" to prepare for Brexit in under two years. They should not count, he says, on long transition periods to cushion the impact of Britain leaving the European Union.

"We might be working on transitional measures post-Brexit, on a phasing-out period and a phasing-in towards the new relationship, but the real transition period is now, before exit", he said. "I would like to recommend all economic players, all economic operators, to make use of this period, so that the day of this exit, probably March 2019, is as orderly as possible".

However, notwithstanding my earlier piece, this report would have it that very few have made firm decisions, and cannot until they see what kind of new trading relationship can be agreed. Putting clothes on that assertion, we see a report which tells us that 98 percent of Irish companies have no plan in place to deal with the consequences of Brexit.

This sort of finding is very much in accord with my experience working for trade bodies. Invariably, when new regulations were introduced, business owners would leave it until the last possible minute before taking steps to comply.

There is every reason to believe that we will see the something of the same dynamic with Brexit. Most will delay taking action but those who do act – such as BNP Paribas, the latest bank to announce that it is moving staff out of London - will assume the worst.

Such companies cannot be faulted. There is a good business case for assuming the worst, especially when confronted with the sort of institutional ignorance and unwarranted optimism exhibited by the likes of Irwin. His claims seem to be much of the same order as assurances on Singapore's safety after the Japanese invasion of the Malay Peninsula.

The unwarranted optimism looks even thinner when one sees this survey conducted by Deloitte, which suggests that very nearly half of German enterprises support the idea of completely excluding the UK from the EU Single Market if it does not adhere to the four freedoms.

Nor is this by any means the first time we have seen such sentiment, which reinforces the premise that Germany is not going to roll over and demand an easy ride for the UK just so that we will continue buying BMWs.

If this needed any more emphasis, we need go no further than Angela Merkel who was addressing a G20 trade union event in Berlin yesterday. She took the opportunity to remind us that everything from just-in-time auto supply chains to the free movement of workers and even their pet cats and dogs will be thrown into question by Brexit.

While Britain would be free to change rules to its own advantage after leaving, she said, the EU would have to take steps to preserve a level playing field. "If the British government ends the free movement of people, that will have its price", she said.

"That's not malice", she added. "(One) cannot expect to have all the good sides and then say there will be an upper limit of 100,000 or 200,000 EU citizens, no more, or just researchers, but please nobody else. This will not work".

The fact that so many areas of policy have for decades operated under EU rules meant that the disruption following Brexit could extend into wholly unexpected parts, she warned. "Currently, the 250,000 pets, cats and dogs that travel from Britain to the continent or the other way around each year are managed within an EU framework," she said. "Now they'll need veterinary certificates - things we don't even remember".

So, in Berlin if not Dublin - the penny is finally dropping: border controls mean more than just customs checks. Belatedly, the Financial Times is waking up to the impact Brexit will have on food safety, albeit addressing only a fraction of the issues we rehearsed in January. Give the paper another year and it might start to catch up, whence the rest of the legacy media can copy its errors.

It was, after all, the Financial Times which invented the €100 billion "divorce bill", only now to have Barnier confront Nigel Farage in the European Parliament after the former Ukip leader claimed that Brussels was trying to "bully" Britain by seeking this amount.

Dismissing the allegation that it was a "ludicrous ransom", Barnier pointed the simple truth that has evaded Farage and most of the legacy media: "There is no figure for a financial settlement between Britain and the European Union yet", he declared.

Said Barnier, such a figure "can only be established once both sides agree on a common methodology of calculations, taking into account the date of exit". The amount will depend on the methodology we adopt and the actual date of the UK's exit. It is not (me) who will set a figure", he added.

Returning to the vexed question of trade, it isn't only the Germans who are going to be playing hardball – not that this was ever the case. The Irish Times is gloomily recording that a prominent French farm leader has lobbed a proverbial grenade into the upcoming Brexit negotiations by calling for the re-establishment of a hard Border between Northern Ireland and the Republic.

This is Christophe Hillairet, a council member of Copa, Europe's largest farm organisation. He expressed fears that the UK would sign agreements to import food from Commonwealth countries after Brexit.

Raising the prospect of the internal border becoming a back door into the single Market, Hillairet warned that the only way to stop these imports finding their way into the Republic and the wider EU was for strict border controls to be reintroduced.

"Ireland is a big problem but for the French farmer we will need to have a hard Border between the North and the Republic as otherwise we will have a lot of products that will cross from North to South. That would be very dangerous for our producers", he told the Agra Europe website.

That once again strikes at Irwin's "fantasy land stuff", not made any better by a timid and dismally unimaginative report from the Institute of Government. While it recognises that free trade areas are "just one tool for boosting trade" and "other options may be much more effective in achieving trade policy objectives", it fails to offer any serious detail on those "other options".

Cutting through the bullshit bonanza, though, is the Frankfurter Allgemeine Zeitung which has the Scientific Advisory Council of the Federal Ministry of Economic Affairs writing to economy minister Brigitte Zypries warning that the Brexit process risks "unnecessary damage to economic relations".

The Council concedes that the mutual economic contacts are so important that it is necessary to conclude a "deep and comprehensive free trade agreement" but considers that the conclusion of such a treaty "will hardly be possible" by the planned exit date in 2019.

The Council's economists, therefore, advise Zypries to push for an intermediate step towards a free trade agreement, seeking to ensure that London joins Efta in parallel with Brexit. This, they say, would minimise disruption.

Interestingly, this follows an unrelated intervention by Liechtenstein's foreign minister Aurelia Frick, who is telling us that Iceland, Liechtenstein, and Norway could be part of the EU's deal with the UK after it leaves the EU.

"Solutions to soften the landing should be available to us", she said ahead of a meeting with Michel Barnier, who then promised that he would keep Efta/EEA States not only informed but consulted about the Brexit negotiations.

The UK has not yet triggered a clause in the EEA treaty, notifying the EU that it intends to leave the EEA. If it neglects this formal obligation, the clause will likely be triggered by the EU, said Dag Werno Hotler, deputy secretary general of Efta (notwithstanding that there is no expulsion clause).

Frick and her colleague, Norway's EU minister Frank Bakke Jensen, said they were "open-minded" about the UK re-joining Efta. "But the initiative would have to come from the UK. For the moment, the question is not on the table", the ministers said.

Once again, therefore, there is rustling in the undergrowth. Cut through the media bullshit and the colossal ignorance afflicting the establishment and there is sense to be had.

Richard North 18/05/2017 link

Brexit: voting a vacuum


A newspaper which parades on its front page the semi-literate ramblings of a pop star on the subject of Brexit really deserves to fail.

But the speed with which the coprophagic tendencies of the rest of the media kicked in tells us a great deal about more about the Fourth Estate than it does the subject. Largely unable to offer any intelligent comment, it reverts to its normal diet of trivia.

The closest to we get to sense – and then only at some distance – is a comment in the Mail Online, which remarked that: "In an intervention absolutely no one was waiting for, renowned politico and One Direction band member Harry Styles revealed that he would be voting for 'whoever is against Brexit' in the General Election". 

That, believe it or not, is what passes for news, for which the great legacy media demands our admiration – and payment.  

Speaking to a (self-described) former journalist recently, we shared views on the dumbing down of the journalist trade. This was a journalist who found an editor admitting to employing two writers "because they are the only people at the paper who can remember anything that happened before 2005".

These are the people on whom we are supposed to rely for our information, unless of course it is politicians who are scarcely, if at all, better informed – and about as mature.

An example of that "maturity" comes from David Davis, doing the usual Sunday TV studio rounds to keep idle hacks entertained.

Speaking to the insufferable Robert Peston, he declared that Britain and the EU are on a "collision course" over the timetable for Brexit negotiations and details over a deal on citizens' rights. The Government, he says, does not accept Brussels' insistence that the "divorce bill" and the Irish border issue should be included in the first stage of talks.

Davis also disputes the EU's wish for the ECJ to have a role in adjudicating over the rights of EU citizens in the UK after Brexit.

According to Davis, there would most likely be a "row" over the summer when it came to sequencing talks, but he nevertheless rejected the idea Britain would have to wait to start negotiations on a trade deal. "We want to see everything packaged up together, and that's what we're going to do", Davis said.

This positions the Brexit firmly in familiar territory for the media, which likes nothing better than the biff-bam narrative – saving it having to do any serious analysis. And meanwhile, the election drones on, the ultimate biff-bam contest which, in this case, will yield nothing but more of the same.

It is ironic, therefore, that one of the "go to" authorities on the current cyber -attack is Europol, with Rob Wainwright - its British-born director – telling us that his agency has recorded more than 200,000 victims in 150 countries. Russia and the UK are amongst the worst-hit countries.

This at one underlines the need for international cooperation but, at the same time, demonstrates that such cooperation needs to extend way beyond the borders of Europe. It is interesting, therefore, to see Europol working with the FBI in the United States, seeking to track down those exploiting a vulnerability in US-originated Microsoft Windows software, first identified by the US National Security Agency.

Whether or not this moves the Brexit debate along is too early to tell, although given the limited abilities of the politico-media nexus, it is unlikely that we will see any intelligent suggestions from that quarter.

Wolfgang Münchau in the Financial Times is doing his best to shift the debate, arguing for a new "plan B" to be produced by UK negotiators. This, he says, should focus on demonstrating to the "colleagues" that the UK does intend to leave, disabusing them of the illusions that the UK can be prevailed upon to change its mind.

If EU negotiators believe that Brexit may not happen, he argues, why offer the UK a good deal? They may even think that a lousy deal could become a self-fulfilling prophesy. They might think that the harder they negotiate, the bigger they can make the Brexit bill and the greater the chances of the UK not leaving.

His recommendation to the UK government would be to liberate their EU counterparts from those lingering doubts, the so-called "plan B" which the UK could adopt in the event of there being a no deal.

The thesis here is that a sudden Brexit could unbalance the EU, which would suddenly realise that its manufacturing companies would be among the biggest losers. The highly complex supply chains into which they have invested would become worthless overnight.

European industry, says Münchau, can cope with a hard Brexit, but not a sudden one. The EU will also find that a large percentage of financial contracts will all of a sudden no longer be subject to EU law - hardly something that is conducive to financial stability in the eurozone. Thus, he ventures, it is only once the EU begins to calculate the costs of a sudden Brexit that these negotiations will start in earnest.

Much of this is the same old, same old game playing, but where Münchau's idea has some small merit is where he asserts that any plan "needs to be fleshed out - with costings, timetables, legal and technical analyses, enough detail to roll out the programme if and when it was needed".

Here we collide with an inescapable truth. Unless, or until the UK government comes up with its own clear ideas for Brexit, we are always going to be at the mercy of the EU and the whims of 27 Member States who have no real ideas of what a post-Brexit environment should look like.

This is something we can take home from Barnier's recent visit to Ireland, where it became evident that he was not exactly brimming with ideas about how to make Brexit work.

Nor is it reasonable to expect the "colleagues" to be the innovators in an enterprise that has been brought about by the UK and is being played out primarily to suit the needs of the UK. If we don't have any clear ideas of what we want, we can hardly complain if the EU's attempts to fill the vacuum don't meet with our approval.

And this is where the election campaign is proving to be a colossal disappointment. Although it is Styled as the "Brexit election", local Tory leaflets refer only to "making a success of Brexit" while highlighting the dangers of allowing Corbyn to carry out the negotiations.

This, squeezed between the media's facile obsession with "slebs" and the vacuity of our politicians, we are no closer to knowing what our masters have in store for us than we ever did.

We are, in effect, being asked to vote for a vacuum, a "strong and stable leadership" whose main claim to fame is that it isn't Jeremy Corbin. And while that might be good enough to satisfy a majority of the UK electorate, it is almost certain that that alone will not impress the "colleagues".

What is on offer is not good enough and, as it stands, we're being taken for fools.

Richard North 15/05/2017 link

Booker: Irish border woes


This was the week, according to the Irish Times that Ireland discovered it was on its own when it comes to Brexit. The discovery came on the back of Michel Barnier's two-day visit to the Republic - snooping around the Northern Irish border, having previously been the first non-head of state or government ever to address both houses of the Irish Parliament.

And that brings Booker into the fray with this week's column, noting that the Irish border question - the need to keep a "soft border" between Ireland and the North - is one of the three items at the top of Barnier's agenda for the Brexit talks, along with the rights of EU citizens in the UK and that "divorce bill".

In a piece headed: "'Hard borders' post-Brexit will make red tape even worse" (not Booker's choice of headline), he writes that many of us voted to leave the EU to free us from the suffocating thickets of EU bureaucracy. We little realised, he says, that outside the EU we might find it even worse than when we were in.

And it is very evident that Barnier knows that this is a massive conundrum. As he made clear to the Irish MPs, Britain's decision to leave both the Single Market and the European Economic Area (EEA) means that the UK automatically becomes what the EU calls a "third country"; which in turn means the re-imposing border controls.

This was always going to present some problems, as even between Norway and Sweden (with both countries in the EEA), there are some border controls, but remaining in the EEA would have reduced them to a tolerable minimum.

It was on the assumption that we would remain in the Single Market that, in April last year we were able to write two pieces (here and here) suggesting that the residual problems could largely be overcome by the intelligent use of technology, with a variety of stratagems and devices which would reduce, if not eliminate, border checks.

However, with Mrs May having decided that we would leave the Single Market, she has opened up a raft of problems that were best avoided – problems which will have a significant impact on all our trade with the EU.

But, writes Booker, whatever problems this may create elsewhere in the EU, they are particularly acute in Ireland, because the two parts of that island, not least their economies, are so closely intermeshed.

For some idea of what this means, we could start by looking at the cross-border trade in what are called "products of animal origin", accounting for a significant part of total trade on both sides of the border.

These range from the 10,000 pigs and 1,000 cattle which cross the border each week in both directions, for slaughtering and processing, to the huge quantities of milk, cheese, butter and other dairy products which, also for processing, may cross the border up to five times before being sold on the retail market.

All these movements, post-Brexit, will become subject to EU Regulation 2016/429, laying down the five-stage requirements whereby any "third country" can export such products into the EU market.

The point which many seem to miss is that these stages apply on to "third countries" and therefore will apply to the UK when it leaves the EU. As we drop out of membership, the ability to export to the EU is not automatic. Firstly, the UK will have formally to apply to the European Commission to be designated as an "approved country" in order to be listed on the relevant databases.

Then, each individual business wishing to export has to be inspected and certified as an "approved establishment". These procedures alone could take months to complete and only then are the businesses allocated an official "establishment number", which must be marked on all goods exported to the EU.

As it stands, all food manufacturers and processors are already awarded establishment numbers, under Single Market provisions. It is possible that the EU will agree to carry over the approvals, post-Brexit. But this is unlikely to happen unless the UK agrees to enforce EU law in these establishments, and apply any new rules that are made. Attempts to "deregulate" could result in establishments being delisted.

Thirdly all products, including live animals, must be certified as compliant with the EU's animal health requirements and all other relevant regulation. This goes beyond merely being produced in approved establishments. The operational procedures under which goods are produced (or animals kept) must conform with current EU rules.

Fourthly, goods must then be accompanied by certificates and other relevant documentation required by EU export regulations. This can mean having to obtain veterinary certificates from "official veterinarians", or certificates of conformity from the relevant enforcement officials.

Then, finally, such goods may only enter into circulation in the EU via a a "Border Inspection Post" (now renamed Border Control Post), where they are subject to a series of checks.

These may be as straightforward as a simple documentation check, ensuring that all the relevant certificates have been provided. But they can include load verification – physical checks of vehicle or container content, to ascertain whether they match the descriptions on the documents.

Checks can also extend to opening packaging, to verify that contents conform with the labelling, and goods may be physically inspected to ensure that they comply with quality and marketing regulations. Samples may also be taken, which can be sent away for testing, for such things as the presence of microbiological contamination, or pesticide residues.

The time taken may vary from a few hours or, where samples are taken for testing, several days or even a week, But only when they have passed the checks and been certified as suitable for free circulation can they finally be presented to customs for admission to the EU.

None of this of course applies to our present borderless trade within the EU, which is one reason why so few businesses either in Britain or Ireland are yet aware of it. But outside the EU/EEA, there are no exceptions. Even countries which have free trade agreements with the EU still have to go through the hoops.

Not the least problems with the Irish Republic is that there are only three EU Border Inspection Posts in the country: two in Dublin, the other at Shannon Airport. To avoid having to divert food consignments to these places, tens of millions of pounds would have to be spent on building and staffing new facilities, and even then it would not be possible to cover every single crossing along the 300-mile border.

As for live animals, we have already reported that Ireland's racing industry fears the implications of all this for trainers and breeders wishing to bring their horses back into the EU from Cheltenham or Newmarket.

But other bureaucratic hurdles will await many other cross-border exports, such as pharmaceuticals, chemicals and all that vast range of products which require a "CE mark" (for Conformité Européene), some of which can only be granted by a "notified body" based in the EU.

The most public warning so far has come from the chief economist of the Irish Central Bank, who claimed that a "hard border" could in coming years cost "40,000 jobs" in southern Ireland alone.

Barnier may blithely hope that he can arrange some "special case" deal with the UK, to ensure a "soft border", minimising all this bureaucracy. But here they could find they are falling foul of WTO rules which prohibit discrimination between third countries.

And already we are hearing from EU politicians, such as Manfred Weber last week, the leader of the largest group in the European Parliament, that no such "cherry picking" can be allowed, because it might encourage other EU members to follow our lead by leaving as well.

But one crucial question Booker asks is whther Mr Barnier and his UK counterparts have actually read Regulation 2016/429. Are they really aware of what they are taking on? The probabilities are that officials at all levels have failed to understand the implications of their own rules.

The learning curve that our own officials are having to surmount may well have to extend to the higher reaches of Brussels officialdom, for Barnier to realise that there is no way of maintaining the integrity of the Single Market, as he demands, while also permitting a "soft border" with Northern Ireland.

Richard North 14/05/2017 link

Brexit: wishful thinking


For Brexit followers, Co Wicklow was the place to be yesterday, where Tony Blair was holding forth to a closed meeting of the European People's Party (EPP), telling us that it would be a "disaster" for Ireland to have a hard border, although he was "sure everyone will and must do all they can to avoid it".

The former British prime minister also enjoined negotiators to use "good will and a lot of ingenuity and innovation" to avoid one, before venturing that the British public could change their minds on Brexit when they see the actual terms of the deal.

Meanwhile, a former Irish diplomat turned critic of his country's Brexit policy has said there is no such thing as a "soft border" and that there will be a border with installations between the Republic and the North.

This was Ray Bassett, former ambassador to Canada, who said that, over time, the border was likely to harden rather than soften and would cause problems for both governments with an increase in smuggling and criminality. "To be quite honest", he said, "in the EU there isn't really such a thing as a soft border. We're using euphemisms there, that we will have a border in Ireland, we will have installations on it".

Such candour is unusual and refreshing, the latter because it cuts though the wishful thinking that seems to pervade this entire issue. The "hard" border is defined by the numerous EU laws which define the various procedures that must be applied to goods from third countries before they can be permitted to cross the EU's external border and freely circulate within the internal market.

The trigger which brings these procedures into effect following Brexit will be the automatic assumption by the UK of the status of "third country".  There are no exceptions to the rules, even where there are free trade agreements in force. Therefore, as long as EU law remains in force, Bassett is entirely right in his assertion. There isn't really such a thing as a soft border.

However, during his visit to the area yesterday, Barnier told the press: "There is always an answer to what shape the Irish border takes after Brexit", adding: "there is always a road when there is a will".

Nevertheless. he warned that the negotiation "will be extraordinary and very complex and difficult", even if the talks were firstly focused on human, social and economic issues. For all that, he offered no detail and no clues as to how these "very complex and difficult" negotiations would develop. Instead, he said: "I want to listen, to meet the people on the ground, to come into the negotiation having the feet on the ground".

One of those which Barnier visited was Swift Fine Foods, supplier of ready meals to supermarkets across Ireland and the UK. A €15-20 million a year business, it sources food from both sides of the border and had planned on a 40 percent expansion of its exports to the UK.

According to the Guardian such businesses are the ones at risk. "Places like this, you could almost turn the lights out if there is a hard border", said director Rod Wood. "I remember the queues of the old days, you wouldn't know if you were going to be five minutes getting through the border or an hour", he said. "We can't go back to those days. Our businesses and businesses around here are completely integrated with the UK as an economy".

Interestingly, his chairman, Ted O'Neill, called for a "five to 10 year transition period" before the UK's complete withdrawal. There speaks realism.

The only message that Barnier would give to the Irish Government, though, was that his door was "open for ideas about how to manage the border after Brexit". But, in order to provide "flexible and imaginative solutions" which "respect the integrity of the EU legal order", Mr Barnier's Brexit taskforce expects proposals from Dublin. He is effectively passing the buck.

Downplaying expectations, an EU spokesman has then made it clear that no "concrete plans" for the border will be possible until the future EU-UK trade relationship is clear. That will not come until much later in the talks, probably towards the middle of next year. EU sources said that Irish initiatives would be welcomed and form an important part of the future negotiations with the UK.

Presumably trying to be helpful, EPP leader Manfred Weber also intervened, declaring that, if it was part of a package of solutions, the EPP and the European Parliament would co-operate in changing EU rules to facilitate a special deal to maintain a soft border.

Weber was less helpful when it came to his views on the British, saying that: "in London there is too little awareness of what Brexit means". They could not, he said, take the bits that they like and not take the bits that they do not like. "Maybe they do not realise this", he added, but "if we allow cherry-picking, people in the EU would see that leaving the EU is not a problem".

That said, it is by no means certain that playing fast and loose with EU law is permissible. If the EU imposes one set of rules for its external border with the UK, while maintaining different, more rigorous rules for other "third countries", it could find itself in breach of WTO non-discrimination rules.

Then there are the internal issues, which are just as problematical. If Irish border controls are relaxed and Northern Ireland is outside the EU while remaining part of the UK, there would be nothing to stop exporters from the UK using the border as a "back door" into the rest of the Single Market. Moreover, imports from the rest of the world into the UK could find their way into the EU by this route, threatening its integrity.

To prevent this, goods exported from Northern Ireland would have to be documented and retain their identity, thus enabling the implementation of a ban on re-export. Unfortunately, the administrative complications of this would create a powerful disincentive for trade, with inevitable economic consequences.

Altogether, there are no easy or obvious answers to the border question and it will take more than honeyed words Barnier to resolve it. But, for the moment, this is all we're getting. Yet, says the New Statesman, no amount of banal reassurance can disguise the fact that uncertainties remain. There will be some hardening of what is currently an almost entirely imperceptible border. 

It's safe, the magazine concludes, to file Barnier and the Commission's "flexible and imaginative" solution in the same drawer as the "seamless and frictionless" border proposed in HM Government's Brexit white paper. As things stand, "these insistences amount to little more than wishful thinking. While the will is there, few are confident that anyone – not least the UK government – have any idea how to pull it off".

The last word, therefore, goes to Danuta Huebner, chair of the European Parliament's constitutional-affairs committee. Her message for the UK Government is: "get your head out of the sand". Her view is that the British government is underestimating the difficulties of Brexit and the costs involved. "There is a creation of expectations that might not be fulfilled", she says. "These are going to be extremely difficult negotiations". 

And that, when it comes to Brexit, is the only certainty.

Richard North 13/05/2017 link

Brexit: the phony war continues


Just occasionally, one can have sympathy for journalists covering events such as Corbyn's leaked manifesto and having to pretend one is in the least interested in it.

Ben Bradshaw, Labour MP for Exeter and one-time junior agriculture minister had it right in an acerbic comment to the BBC about being 20 points behind in the polls and the need to "get real", salvaging enough MPs from the wreck of a campaign to form a credible opposition in the next Parliament.

Bradshaw is one of those MPs who, on the face of it is fairly safe, with a 7,183 majority at the 2015 election, increasing his share against the trend. But his is a seat which saw the Ukip vote increase from just short of 2K in 2010 to over five thousand in 2015. With the collapse of the Ukip vote and a swing to the Conservatives, Bradshaw is actually vulnerable.

As to Corbyn's manifesto – well, who does care? But the irony is that his plans to nationalise the railways, energy and the post are made that much easier by Brexit – not that any of the disinterested hacks actually realised this. Perhaps this was Corbyn's coded message, saying he was in favour of leaving the EU – but if it was, no one noticed.

It's a pity though that Corbyn didn't add water to his list of renationalisation – not that it should be nationalised as such. Water was never owned by the national government which, in order to sell it off, expropriated municipal assets, stealing them from their rightful owners. The companies were never the government's to sell, and should be returned.

Apart from making wealthy Singaporean hedge fund owners even more wealthy, privatisation does not seem to have achieved much else. With talk of another drought in the air, the Guardian reports that customers are being asked to save water, but more than 20 percent of water is lost before it reaches homes and leakage levels are not declining.

Data from the water industry regulator Ofwat shows more than three billion litres of water leaks every day, a level unchanged for at least four years and just seven percent lower than the level in 2000.

Meanwhile, the Brexit action moved to Dublin where Michel Barnier was accorded the rare honour (unique for a non-head of state) of addressing the joint houses of the Oireachtas (Parliament) on the Brexit negotiations.

That is not to say that he actually conveyed anything new. He reaffirmed that Brexit changes the external borders of the EU and promised to work with the Irish "to avoid a hard border", but went nowhere towards telling his audience how this would be done.

One worries a little, though, when the man says that "Customs controls are part of EU border management" and that, "They protect the single market. They protect our food safety and our standards".

Strictly, they don't protect food safety. In the litany of protections, these "official controls" are veterinary and phytosanitary checks which are entirely separate and must be completed before relevant products are submitted for customs clearance.

If Barnier can't get this small but important detail right, then one wonders just how much a grip of the detail he really has, and whether he fully understands which is involved when the Irish border becomes the final frontier between the EU and the outside world.

The absence of such details are lending a surreal aspect to the Brexit non-debate, and crucial technical issues are placed "on hold", and what little discussion there was has evaporated. Beyond looking for "flexible and imaginative solutions", we're no further forward in finding a solution for the Irish border problem, especially if it has to "respect the integrity of the EU legal order".

Unsurprisingly, therefore, we got a nervous comment from Gabriel Fagan, chief economist of the Irish Central Bank. He states the obvious, that the Irish economy is particularly vulnerable to any new tariff or regulatory barriers with the UK, which may arise as a result of Brexit.

He warns that within 10 years of a "hard Brexit", the number of people employed would be 40,000 fewer, compared with a no-Brexit scenario. Some small and medium-sized Irish businesses are "likely to be among the hardest hit".

Yet all we actually got from Barnier was "motherhood and apple pie" sentiment, with the man telling us that, "if we put things in the right order, if we negotiate with mutual respect, without any aggression and naïvety, and if we are open to finding solutions, there is no reason why our strong Europe cannot maintain a strong relationship with the UK".

One notes the insertion of the word "naïvety" and wonders whether this was directed at Mrs May or her "Ultras", but if this was another coded message, it possibly conveys much the same as Junker was trying to tell us about the demeanour of Mrs May and her residence on other galaxies.

Today, Barnier is to visit an Irish dairy cooperative in the border areas of Ireland. Maybe we'll get more detail from this, although I somehow doubt it. Until the UK general election is over, we seem to have moved into a new phase of the phoney war.

Maybe it's just as well that, at this point, David Cameron should intervene to urge Mrs May to stand firm against her "Ultras". Campaigning in Crewe yesterday, he suggested that if she won a big majority she would be better equipped to fight for a "soft Brexit" – whatever that means.

"This is one of the most defining elections I can remember where it's so important that the Conservatives win and win well, so Theresa can negotiate that Brexit deal and stand up to people who want an extreme Brexit, either here or in Brussels", he said.

Perhaps, though, Mrs May has already made her mind up on this, having just appointed former European Commission official, Peter Hill, as her principal private secretary official.

Hill, who worked in Peter Mandelson's cabinet in Brussels when he was trade commissioner, has served as director of strategy at the Foreign Office since 2013. He is said to be one of the few people in the top ranks of British government with experience of trade negotiations. It is thought that his appointment will reassure critics of the Government's current stance on Brexit.

Others are also taking comfort from the indication that Mrs May is favouring candidates who support a "soft Brexit" agenda, blocking people such as Daniel Hannan and David Bannerman, Tory MEPs who are looking for a new home to replace the Brussels gravy train.

But, where one door opens, another slams shut – this one in the face of Sara Roebuck, who is doing a double masters in European politics at Sciences Po Paris and the London School of Economics.

She recently attended a careers event in Brussels with her university class to discuss job prospects at institutions like the European Parliament or the European Commission, only to be told that getting a job with European Union (EU) institutions will be "out of the question" after Brexit.

Instead, advisers at the EU department that recruits public servants told the 24-year-old she would have to obtain French nationality in order to have any chance of following that career path.

One hopes that the mention of French nationality was related to Sara Roebuck's current location in Paris, otherwise there is the fear that, with no British counterbalance, the French are going to take over running the EU – except that many already believe they do.

But this is very much a sign of things to come. What little influence the UK exerts in les couloirs of Brussels is likely to be further diminished, yet there is probably not going to be any compensating increase in global bodies until we've established a greater presence (with all the financial costs that that implies).

It would be nice to think that, already, the FCO (together with the Department for International Trade) are planning a massive uplift in recruitment, to staff posts in global institutions, although there is no sign of that happening yet. In fact, if we are to believe what we are told, the UK is going to have trouble recruiting enough people to match the team put up by Brussels to negotiate Brexit.

Perhaps if Mrs May continues to keep it vague, it will at least minimise the pressure on human resources and, when we go under, there will be fewer redundancy notices to hand out. There must be some reason for the prime minister's silence on Brexit – and this is more logical than most.

Richard North 12/05/2017 link

Brexit: "Brussels gossip"


Gradually, with excruciating slowness, we're seeing the rest of the legacy media waking up to the "train-wreck" dinner last Wednesday, first reported by Politico, when Theresa May bared her ignorance to the Barnier and Juncker duo, leaving Juncker to go running to Merkel, who promptly pressed the alarm button.

Now, four days after the event, we have the Independent, the Daily Mail and the Telegraph picking up the threads. The Guardian is revisiting its earlier report and belatedly even the Financial Times has joined the throng.

Ironically, what has triggered renewed journalistic interest is the intervention by one of their own, Berlin Bureau Chief at The Economist Jeremy Cliffe. He tweeted a partial translation of the Frankfurter Allgemeine Sonntagszeitung report, which has been picked up with an enthusiasm not afforded to a similar report in The Sunday Times. We now have our own rough translation.

Predictably, the FAS report is being dismissed as spin by the "Ultras" and their allies, with the idiot Jacob Rees-Mogg suggesting that the EU "is trying to bluff us into believing its weak position is strong". Through Monday, Downing Street distanced itself from the account, saying that it "doesn't recognise" it – phrasing which stopped short of a denial – only then for Mrs May to respond to journalists' questions and dismiss claims as "Brussels gossip".

For all that - as we have remarked earlier - the power of the FAS report rests not only on its content but from its confirmation of that which we have known or suspected for some time – that Mrs May and her "Team Brexit" are entirely dysfunctional and that Mrs May herself is seriously delusional in her expectations as to the outcome of the Brexit talks.

From both the reports of the dinner and Mrs May's public response afterwards on the Andrew Marr show, it seems that the Prime Minister genuinely believes that a full-blown free trade agreement can be concluded within the two-year Article 50 period, alongside all the other business. Furthermore, she seems to believe that this will place the UK on much the same footing as it currently enjoys as a participant in the Single Market.

It is that which had Angela Merkle denouncing the "illusions" in front of the Bundestag, and no amount of damage limitation by No 10 is going to change that.

As to the details of what transpired at a dinner which is rapidly becoming more famous than the Last Supper, to many of these have the "ring of truth". They sound entirely credible and are so in character it would hardly be necessary to invent them.

For instance, in the presence of Brexit Secretary David Davis who was also at the dinner, it is said that Mrs May – even though she was meeting the principal players in the coming Brexit negotiations - wanted to talk about anything but Brexit, loftily preferring to discuss global issues. It was left to Juncker to bring her back down to earth.

May's approach is actually quite typical of the Tory grandee treatment of politics – where they seek to dominate a conversation by focusing on generalities and avoiding detail. By sticking to les grandes lignes, they retain control and stay within their comfort zones.

Once forced to address the detail, though, it seems that May's ignorance and her almost total failure to grasp the practicalities soon became evident. The EU side were thus astonished at her suggestion that EU/UK expats issue could be sorted at a European Council meeting at the end of June.

According to the narrative, it was left to Juncker to object to this timetable as "way too optimistic", given the complexities involved. It was at this point, apparently, that he pulled two piles of paper from his bag: Croatia's accession treaty and the Canadian trade agreement, thereby making the point that Brexit would be very complex.

That Juncker should have done this is entirely credible. He was pointing out precisely what we've been saying, making the same point in the same way – that the "divorce treaty and a future treaty would be at least as extensive". How interesting it was also that Juncker should flag up an accession treaty.

But UK prime ministers don't do detail. They waft about, demanding that complex issues be reduced to one side of one sheet of paper, preferably with bullet points, and are then caught out because, outside No 10 and the Westminster bubble, the world isn't a simple place. As a way of getting this through to the prime minister, Juncker's "stunt" had much to commend it.

As an aside, it really is quite remarkable how easily the media swallow the fiction that CETA is 2,000 pages long. If Mrs May hasn't read it and is unfamiliar with its contents, that must also apply to the majority of journalists, who would otherwise know that it runs to a mere 1,598 pages. Together with the 124-page Croatian Accession Treaty, that makes 1,722 pages.

So far, protecting herself from such details has allowed Mrs May to build an elaborate but entirely unrealistic construct as to the way she thinks negotiations should go. At the dinner, she suggested that delegates should work through the agenda in monthly, four-day blocks – and that everything is kept confidential until the end of the process.

I can't see that this sort of detail could be invented. And if it was a serious suggestion from Mrs May, then its betrays the most appalling ignorance – fortified by a level arrogance that must have had Juncker and Barnier speechless.

The essence of EU negotiations is that they are conducted in 23 working languages, spread between 27 European capitals each involving multiple ministries and parliaments – all needing input and consultation. By the time working agendas are agreed, documents are translated and circulated, and all the relevant bodies are consulted (including the European Parliament), it is virtually impossible to arrange substantive meetings at more than three-monthly intervals.

This is one of the reasons why EU negotiations take so long, but it is also the reason why they are organised the way they are – with continuous, low-level exchanges between "sherpas", punctuated by occasional "plenaries", where heads of agreement are settled. Mrs May's proposal is entirely at odds with the Community method of working.

As to the idea of keeping the talks confidential, anything involving 28 different nations is bound to leak. Mrs May needed only to refer to the official history of the UK's accession negotiations to know that, even then, it was concluded that any attempts to keep proceedings secret would fail.

One would have thought here that the very first thing officials (and Mrs May herself) would have done in preparation for the forthcoming talks would be to read up the reports of how the last major talks were conducted. But apparently, this has not been done.

It was thus left again to the Juncker-Barnier duo to bring May back to earth, pointing out that secrecy was impossible to reconcile with the need to square off Member States and the European Parliament. Documents would have to be published.

Retreating into her fantasy, however, it seems that May resorted to comfort quotes, enjoining her guests to "make Brexit a success". Again this is quite typical. It is something the prime minister has been doing for the last ten months. Unsurprisingly, the EU side felt that Mrs May was wearing rose-tinted glasses.

If Juncker then countered that since Britain would become a third country, not even (like Turkey) in the customs union: "Brexit cannot be a success", this again is entirely credible. Nor would one be taken aback by the idea that Mrs May was surprised by this. The concept of the UK as a "third country" does not yet seem to have percolated the upper reaches of the government. It is more likely than not that she has not been "fully briefed".

For her own modus operandi for the negotiations, she is then said to have cited as a model her own Justice and Home Affairs opt-out negotiations as Home Secretary, despite the fact that this had already been discounted. As this is vintage May, it is hardly likely that it was fabricated. One can quite understand it setting off alarm signals for the Juncker-Barnier duo, telling them that Mrs May had not thought through a workable strategy.

"The more I hear, the more sceptical I become", Juncker is reported to have said – and this was only half way through the 90-minute dinner which then had Mrs May insisting that UK owes the EU no money because "there is nothing to that effect in the treaties". Davis then chipped in, asserting that the EU could not force the UK to pay, to which Juncker is said to have pointed out that there would be no trade deal.

Having informed Mrs May that the EU was not a golf club, Junker told her: "the parents had children, and the divorcees would have to recognise their obligations". As he departed, he told his host: "I leave Downing Street ten times as sceptical as I was before".

But really, does this come as such a surprise? Month after month after month, we've been suffering an information vacuum from Number 10, while our own sources (some public, some not) suggest that there has been no credible plan worked out. More and more, as Pete points out, Mrs May is out of her depth.

At the very least, one can take from this latest report that there are major communication issues to be resolved before the negotiations proper get under way, but it would be hard to conclude from the exchanges that Mrs May was fully master of her brief. More alarmingly, one could surmise that the prime minister is labouring under fundamental misconceptions about Brexit and the nature of the European Union, indulging in what Germany's Europe Minister calls fairy tales.

The point about this is that such misconceptions are to be expected – especially amongst senior Tory politicians, who have elevated ignorance about the EU to an art form. What would be really remarkable would be to find such a politician who had a proper grounding in the EU and actually understood the issues. I have yet to meet any such person.

This is, of course, why the charge of "delusion" rings true. It spreads through the political classes and into the media, where small-minded and dishonest journalists ply their wares, each claque mutually reinforcing each other's ignorance and prejudices.

To the legacy media in general, though, this is just another story. Tomorrow it will be the proverbial fish-and-chip wrapping, submerged in the constant torrent of the 24-hour news agenda. By the end of the week, if No 10 has its way, it will be buried and forgotten.

Nevertheless, it remains further confirmation that Mrs May does not have a grip on Brexit and is leading us up a blind alley. Our response to that cannot be immediate, as there is no realistic alternative to be found in any of the other political parties.

However, under the radar, an increasing number of enterprises are making decisions about whether to relocate all or part of their businesses outside the UK. This episode will doubtless have made up more minds, and not to the benefit of this country. If the trickle becomes a flood, Mrs May will be forced to revise her plans, or to make some new ones afresh – assuming it will not be too late.

For the time being, we watch and wait - our only consolation being that, with each passing day, we're better informed.

Richard North 02/05/2017 link

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