Brexit: no one in control


The New Statesman has published an article with the headline: "Who is the EU's chief Brexit negotiator Michel Barnier?", offering a potted biography. 

It would have been better had it inserted a comma, making the header read: "Who is the EU's chief Brexit negotiator, Michel Barnier?" By that means, it would have been addressing Mr Barnier, posing a very relevant question. 

The answer, of course, is no-one. As we pointed out at the time of Barnier's supposed appointment, until Article 50 is invoked, the chief negotiator cannot be appointed. Then, rather than the Commission making the appointment, the post is entirely within the gift of the European Council - the leaders of the 27 Member States who will decide on the outcome of the negotiations.

More than a few people have seen in Juncker's action a pre-emptive move in what is the ongoing power struggle between Council and Commission, with the Commission getting in first to stake its claim.

But, leaving nothing to doubt in an extraordinary act of hubris, the Commission is now describing their man as "Chief Negotiator with the United Kingdom under Article 50 of the TEU", an arrogant presumption that deserves to be slapped down with little ceremony.

Perhaps though, Juncker thinks that by launching Barnier in a high profile role, with a gullible press rolling over and accepting his coup at face value, he will box Tusk into a corner, making it almost impossible for him to choose someone else without a very public and damaging row.

On the other hand, almost daily we are seeing changes to the composition of the European Council. Two of the three figures who so publicly gave homage to Spinelli, back in August,will no longer be around when the negotiations get under way.

There is also a possibility that the President of the European Council, Donald Tusk, will no longer be in charge past the first few months of the negotiations, His second term as president is by no means assured.

All we would need is for Chancellor Merkel to take a fall and we would be dealing with a very different – and more unpredictable – European Council. Junker could find himself with far stiffer opposition that he had anticipated, with the appointment of an entirely new face to manage the negotiations.

That said, yesterday, Barnier was cock of the walk, giving his first "press briefing" in Brussels as usurper-in-chief, setting out his  view of how he sees the negotiations developing.

Sadly, as it was a briefing rather than a formal speech, all we got on the publicly-available video was 13 minutes of introductory remarks, spoken in English and then repeated (more or less) in French, with no record of the press questions.

However, the "take home" point was Barnier stating that the settlement would require approval by the Council and the European Parliament, and then ratification by the UK Parliament. He is allowing six months for these processes which, he says, only gives 18 months for substantive negotiations. If Mrs May invokes Article 50 by the end of March, that means that talks must be wrapped up by October 2018.

This was much the point made by Guy Verhofstatd, when he recently warned that there would be an "intense" window of 14-15 months for negotiations which "need to be finished in any case before the next European elections (in May 2019)".

Verhofstadt, of course, is another pretender, posing as the European Parliament negotiator, for talks in which the Parliament has no formal status. At best, he can be an observer, taking part in discussions on the margins. He cannot demand a seat at the table, as of right.

Both Verhofstatd and Barnier warn against "cherry-picking", reiterating the now well-worn mantra that the four-freedoms are an integral part of the Single Market and, as such, are non-negotiable. This is something Angela Merkel has also been keen to repeat.

However, Barnier does not rule out a transitional settlement, although he declined to go into what kind of relationship would be possible. Nevertheless, he cites the example of EEA members, stating that Norway and Iceland indicated how a transitional arrangement could operate.

By coincidence - one assumes - Norwegian foreign minister Børge Brende was in London on Monday to meet Boris Johnson, David Davis and Liam Fox for talks over post-EU future. Predictably, for a Norwegian conservative with long-standing Europhile tendencies, he took a downbeat view of UK following his country's path.

Britain must understand that there is no "silver bullet", he said. "Being a part of the Single Market, as we are, also means to implement all directives, and we are not in the room when these directives are decided on", he added.

This is the usual misleading rhetoric, more so as we have never regarded the Efta/EEA route as anything other than the least-worst option, suitable only as an interim settlement. Here, there is some encouragement as Brende concedes that Norway's access to the Single Market "had served our country well". He confirmed that if Britain chose to "go through an EAA agreement", his country would assess its interest.

But what no one is putting together – at least publicly – is the degree to which continued EEA involvement changes the game. It cannot be repeated often enough that the EEA Agreement is a distinct treaty with its own rules, entirely separate from the EU treaties. The UK, following the Efta/EEA path, would be dealing with and entirely different set of actors, outside the Article 50 process. And in that environment, the "four freedoms" are not a fixed quantum, no matter what the Prominenten say.

To that extent, Barnier might have less control than he thinks, and be less capable of influencing events than he likes. With the internal power play between the Council and Commission, and the dynamics of new faces at the table, the outcome becomes a whole lot less predictable than he and the general run of pundits would have it.

That much also applies to the domestic front, where Theresa May, against her own inclinations, has been manoeuvred into promising to present her exit plan to MPs before she invokes Article 50 in March. This is being regarded in some quarters as "a major climb down" to avoid a humiliating Tory rebellion in the Commons today during an opposition day debate.

Yet, on a visit to Bahrain, Mrs May is talking of a "red, white and blue" Brexit, thereby scotching ideas of a so-called "grey Brexit". This was a half-baked idea which was being floated over the weekend, involving a CETA-like agreement with the EU. It has not even survived into mid-week.

Furthermore, those who understand that the EEA option is almost infinitely flexible will know that her rhetoric does not rule out going in this direction. But, as always, it does not rule it in either. And neither can anything be inferred from Liam Fox's announcement that he intends to shadow the EU's WTO schedules of commitments.

While Lib-Dem leader Tim Farron believes this is "a clear sign the Government is steering the country towards an economically disastrous hard Brexit", The Sun reports that Fox is launching a bid "to join [the] World Trade Organisation as independent member". Despite the rampant ignorance, though, this is a necessary administrative step towards independence, very much along the lines we envisaged.

What that says is that reality remains in the driving seat, while none of the players are totally in control – not even the Supreme Court, which seems to be so distant from real world issues that, by the time it delivers its judgement, we will probably have forgotten what it was ruling on.

There is still a very long way to go and about the only thing about which we can be sure is that the direction of travel is anyone's guess. As we have seen, and continue to see, the pundits have an unerring capacity for getting it wrong, while even the best are finding the way hard to divine.

Richard North 07/12/2016 link

Brexit: the wages of incompetence


The big mistake we have all been making has been to focus too much on the mechanisms for leaving the EU, with not enough given to what we want out of Brexit. Thus, it is perfectly fair to observe that, in the referendum, we voted for a departure, not a destination.

Even now, the public discourse is largely avoiding the question of where Brexit is taking us, with the end result more likely to be a consequence of our mode of leaving rather than the result a deliberative policy. Rather than defining a direction of travel, therefore, the Government seems to be devoting more effort to containing the effects of different leaving options.

Raising the issue from outside the bubble, though, is not going to be easy - although Pete has made a start. The bubble-dwellers are so behind the curve that they haven't even begun to think seriously about an end game. And neither are they temperamentally or intellectually equipped to do so.

In any event, for the next week we are going to be distracted by the Supreme Court hearing, which is going to trigger interminable comment on Article 50 and related matters, with no resolution in sight until mid-January. That will shunt discussion on an end game further down the line.

Despite most journalists having a basic education and at least average intelligence, they nevertheless seem to be making an incredible meal over the term "interim", or "transitional". We assume most of them know what these words mean, although they seem to have difficulty in translating them into practical effect.

Thus we have the likes of Simon Watkins in the Mail on Sunday whingeing about the aims of Brexit being "diluted". One by one, he writes, "the much-vaunted aims of Brexit are being diluted. The core objectives were surely leaving the single market, scrapping our payments to the EU and controlling immigration".

But those objectives were not part of the referendum which, as we all know, was confined to the question of whether we should leave the EU. There was no plebiscite on the Single Market, and many of us did not consider (and still do not consider) that EU payments were a core issue.

As to immigration, despite the recent surge on movement from EU Member States, it is still the case that more immigrants come from outside the EU – where we have the means of control but choose not to use them.

Where immigration from the EU is concerned, a post-Brexit UK that stays in the EEA (via Efta) would have the unilateral right to restrict movements, under Article 112 of the EEA Agreement. It is only the absolute determination of the politico-media nexus to remain ignorant on this issue which allows the likes of Watkins to make the point he does.

But what he and so many of the others ignore is that concessions which might be unacceptable if they were part of the final settlement may be tolerable – and even welcomed – if they were part of an interim settlement which paved the way to a stable long-term solution.

The degree to which we would be prepared to accept concessions would doubtless depend on the nature and attractiveness of the end game. But it is not unreasonable to posit that the more attractive it is, the more we are prepared to concede in order to attain it.

Ironically, within Flexcit we have long held that an option which keeps us in the EEA and thus the Single Market for the short-term is the best we can hope for. Our longer-term aim is the abolition of the EEA as we know it, with the reconstitution of the Single Market under different management, with the headquarters moved out of Brussels to Geneva.

Doubts about the practicality of this come mainly from people who have not read (or understood) Flexcit and, amongst that sub-group, there are many who dispute that the idea is at all practicable, couched in terms of the EU never permitting it.

Yet, entirely of its own volition, Brussels has ceded legislative authority over vehicle construction and safety, and on vegetable and fruit marketing standards, and is now a law-taker in these spheres. It has not made new laws here for many years.

Add to this the WTO TBT and SPS agreements, and the Vienna and Dresden agreements on standards, and we see that much more of the Single Market acquis has been ceded to regional and global organisations – to say nothing of the global nature of financial services legislation.

Totally under the horizon, we have also seen the emergence of a systematic process for standard-setting, via UNECE's WP.6, which has the support of the EU and the participation of all EU Member States. For a post-Brexit UK, this would be the obvious – and effective – forum for cooperation on standards setting, keeping the UK full in the loop on developing the Single Market.

Such matters, though, are totally above the "pay grade" of the average journalist, most of whom are still wittering about the "loss of influence" and "fax law" if we take the EEA option. The idea that Norway could actually have more influence, rather than less influence outside the EU, is totally beyond their grasp.

Eventually, we suppose, some of them will catch up – but the process is painfully slow. Issues we were writing about three years ago have still to be settled by the legacy media and many of the politicians, who seem stuck in their own laborious version of Groundhog day. At least, in the film, the loop came to an end. There is no certainty that it will do so in real life.

Perversely, we see in The Times Matthew Parris complaining that: "The British disease is now rank ineptitude", writing that, "whatever the trade or profession it seems to be considered bad form to root out the stupid and the incompetent". Significantly, though, he does not include journalism in his list of failing trades.

Then we get the likes of Nigel Jones in the Telegraph telling us that the Leave majority in the Conservative party should set aside their differences with Ukip, and working with Ukip's new leader Paul Nuttall to mount a grassroots campaign to press the Government in the direction of the EU's exit door, with a view to achieving a "clean break".

Clearly, Jones has not noticed that there is not a fag paper between the position of the Tory Right and Nuttall's Ukip, which now has Gerard Batten for its Brexit spokesman calling to ditch Article 50 and repeal the European Communities Act – exactly the stance taken by John Redwood.

As we begin to see in Nuttall another of those Walter-Mitty figures with extremely ambiguous CVs, one would have thought the best option for the Conservatives would be to put as much distance between them and Ukip as they possibly could.

Little did we think for all those many years when we have been dreaming of leaving the EU that, when the great event finally came, the driving force would be the incompetence of the major players – from ministers who don't know the basics, to MPs locked in their private miasmas of ignorance, and a legacy media which inhabits a different planet.

One can only hope that, deep within the bowels of government, there are people who do know what they are doing. But if there are such people, they are keeping themselves extremely well-hidden.

Richard North 04/12/2016 link

Brexit: reality takes a seat


Reuters have picked up and embellished the story that most of the media were running with all day yesterday, reporting that Chancellor Philip Hammond says that Britain needs to keep open the possibility of continuing to pay fees to the EU even after it leaves. 

This was after Brexit minister David Davis, in answer to an oral question in Parliament, had said that Britain would consider making payments to the EU after it leaves, if that was necessary to achieve the best possible access to the Single Market.

Hammond is cited as saying: "We have to look at any deal in the round ... and I think David Davis is absolutely right not to rule out the possibility that we might want to contribute in some way to some form of mechanism".

Despite a sharp reaction from the likes of Peter Bone and the squealing of anguish from the Brexit morons, this was always going to be a possibility – verging on certainty.

Needless to say, the loudest squeals have come from Ukip, with their new Brexit spokesman, Gerald Batten, saying: "David is already going weak at the knees. It is ridiculous to offer to pay to trade with the EU. Every country in the world has access to the single market".

But there is a lot more to this than Batten's simplistic nostrums – the man who wants to ignore Article 50 and go straight to the repeal of the European Communities Act.

As it stands, none of the Efta/EEA countries pay for market access. They pay grants in aid to help the emerging economies of Eastern and Central Europe and they pay for participation in decentralised agencies and programmes.

But there is also the question of what might be termed "legacy payments". These we deal with in Monograph 3, pointing out that, at the very least, we will have to honour the MFF commitments, which means that we will be paying a sum equivalent to our net annual payments until the end of 2020.

For that, we can barter participation in the decentralised agencies and programmes, so the net effect on expenditure will probably be neutral.

It is the next MFF programme that is going to be really interesting, when the RAL kick in and the "colleagues" demand the UK "share" of repayments, on top of agency and programme contributions. As Booker observed, with our own payments to farmers and others we could end up paying more overall than we are now.

The media far and wide, however, are casting this as a "concession", as if there was any choice in the matter. Short of a cold, hard Brexit, though, we are going to have to pay something to the EU. The only question will be how much we will have to pay.

What we are seeing in the responses is the media and politicians playing catch-up, as they are right across the board.

Only now are pundits getting to grips with the idea of a transitional deal, and the need for an end game, while many remainers, having rejected the idea of the "Norway option" before the referendum are now embracing it with zeal.

The payments issue, though, is likely to be particularly sensitive, given the rash claims made by Vote Leave and their fellow travellers. Arron Banks has called Davis's words "incredibly foolish".

Yet, the foolishness comes in failing to recognise and acknowledge that the UK cannot expect a cost free exit from the EU, and walk away from long-standing treaty commitments without offering something in the way of compensation. To refuse to accept this simply isn't practical politics.

Over the next few months, even running to years, we are going to see a lot of this – silly, shallow people like Banks, who have no grasp of the realities of international relations, making their facile statements. Meanwhile, the business of grown-up politics will have to continue, simply because it must.

That, in the end, is going to drive the outcome of the Brexit talks. The government is going to have to "concede" certain issues because, unless it does, there simply won't be a workable settlement. The pundits will just have to catch up as best they can.

But the same reality will have to drive the "colleagues". With the latest immigration figures just in, they will have to recognise that the UK government will not be able to agree a settlement that does not involve some real concessions on freedom of movement.

But then, there are no constants in this ever-changing political kaleidoscope. We heard yesterday, for instance, that Hollande was not going to stand for a second term as French president. This comes as no particular surprise but it confirms that there will be at least one new face at the table when the negotiations start.

When those talks do finally start, there will be something else at the table – something which is currently missing – a sense of reality. The parties will agree because they must agree. Meanwhile, the noisemakers will do what they do best – make noise.

Richard North 02/12/2016 link

Brexit: a crisis of competence


Recently, and many times on his blog, Pete has been writing of what amounts to a crisis of competence amongst MPs.

Although there has to have been a time when they weren't wall-to-wall drooling imbeciles, in his latest piece, Pete surmises that – possibly as a consequence of having handed over so many functions of government to the EU – our representatives no longer have the mental capacity to perform their functions.

One MP (or many) determined to demonstrate that this is the case is Peter Lilley who, last Sunday had published in The Sunday Times a piece on how we should leave the EU. 

His conclusion was that "our main objective should be a speedy conclusion", to which effect his idea for Brexit was straight out of the Redwood school. Aiming to bring the issue to a head before the French, German and Dutch elections, we should, Lilley wrote:
… simply announce that we will continue to give EU imports tariff-free access - unless it chooses to impose WTO tariffs on us, in which case we will reciprocate. The onus would then be on the EU 27 to continue free trade or take the blame for triggering tariffs on their exports to their biggest market. Continental governments threatening this would face the wrath of German car makers and unions, French wine growers, Dutch horticulturalists and so on for initiating an unnecessary tariff battle in which they lose more than we do.
The stupidity of this – for a man who is reckoned to be one of our brighter MPs – is beyond measure. If we leave the EU without a trade settlement, we will afford ourselves the status of a "third country" in relation to the EU.

This means that we place ourselves outside the tariff wall, whence goods exported to the EU Member States will automatically attract the prevailing duties. This is not something the EU does. It is something we will do by virtue of turning ourselves into a third country.

Furthermore, under WTO rules, the EU must levy MFN rates on all third countries without discrimination. If it gave preferential access to the UK outside the framework of a formal trade agreement, it would have to concede the same to all other third countries. This, it would be unlikely to do, as it would damage its trade policy.

On the other hand, if the UK opens up its markets, tariff-free, to the EU – outside the framework of a trade deal – under WTO rules, it must remove tariffs completely for all other countries – thereby removing any incentive any country might have to sign a free trade deal with us.

The point about all these matters, though is that we've explained them many times – not least in our Monograph series, which Mr Lilley claims to have read. It is not something special or made up. This is basic WTO law. But Mr Lilley thinks he knows better. And he has no need of evidence. As one of the chosen ones, he evidently feels he has a right to make wild assertions and be believed.

What is particularly tiresome about such people is that they all tend to adopt the same polemical strategy. For instance, when John Mills was confronted with the prospect of negotiations taking a long time, he argued that, after Norway rejected EU membership in 1972, the Norwegians negotiated a trade deal with the EU in just under eight months.

Never mind that this agreement was 113 pages long, including schedules. The substantive treaty was six pages. It was a very basic treaty, dealing with a very limited range of products, concerning tariff reductions. And never mind that the treaty was replaced in 1994 by the EEA Agreement – which took from 1984 to 1992 to agree.

Thus we have Lilley argue that the government's claim that the process would take 10 years should be consigned to history. The two years laid down in article 50 is a maximum. It need not take that long, he writes.

He goes on to tell us that negotiating to join the European Economic Community took barely two years. That was far more complex than leaving: we had to introduce VAT, implement existing European law, replace Commonwealth preference and much else. Furthermore, he adds, the North American Free Trade Agreement (NAFTA) took only 14 months to negotiate.

The thing is, it doesn't actually take very much to show how dishonest this strain of argument is. For instance, the UK accession negotiations were carried out in two tranches, 1961-63 and then 1970-72. Much of the ground-breaking work was completed in the 1961-63 period, dusted off and carried over.

In between, as we now know, President Pompidou had decided as early as the Hague Summit in 1969, long before the second phase of the negotiations had begun, that Britain's accession could no longer be resisted by France. Thus, when the second phase began, it was already pre-ordained that they would succeed.

Not only is this hardly the case with the Brexit negotiations, we also know of the '70-72 period that our chief negotiator Con O'Neil famously took the line "swallow the lot, swallow it now", as the approach to the negotiations, in order to expedite proceedings.

As for VAT, this was introduced in the 1971 Budget by Anthony Barber. It did not impinge upon the negotiations. We were then negotiating a treaty which, with all the protocols and additions eventually came to 200 pages. By contrast, the current consolidated treaty runs to 410 pages – more then twice the length.

As to NAFTA taking "only 14 months to negotiate", this is misleading. Such agreements do not come out of the blue – there is always a lead-up to them, which is an essential part of the process.

In this case the impetus for NAFTA actually began with President Ronald Reagan who in 1984 gained Congress approval for the Trade and Tariff Act. That gave the President "fast-track" authority to negotiate free trade agreements more freely.

The Act led directly to negotiations with Canadian Prime Minister Mulroney, culminating in the Canada-US Free Trade Agreement, signed in 1988. Meanwhile, Mexican President Salinas and President Bush began negotiations for a trade agreement between the two countries. Into this, the Canadian agreement was folded, making it a trilateral agreement which then became NAFTA.

NAFTA was finally signed into law by President Bill Clinton on 8 December 1993, effectively taking nine years for the entire process to come to fruition.

Part of the game-playing by people such as Lilley, though, is to make the Article 50 negotiations appear much less problematic than they actually are, and this is one of the techniques.

Another technique is the "straw man", misrepresenting the nature of the options available. Thus, according to Lilley, "three options" have already been ruled out by government: remaining in the single market; remaining in the EEA like Norway or staying in the customs union. Never mind that the EEA option is an EU-free Single Market option. He doesn't want you to know that. 

In his assessment that leaves "only two realistic outcomes for Britain's future trading relationship with the EU". Either, he writes, the UK and EU 27 continue trading freely with each other without tariffs. Or we both apply to imports from each other the same World Trade Organisation (WTO) tariffs that we currently apply to the EU's biggest trading partners. Both options, he asserts, "are pretty simple and better than our present situation".

And there speaks a man only of tariffs. Like so many of his ilk, non-tariff barriers simply do not exist. They are not mentioned at all in Lilley's dissertation.

It is here that Pete's crisis of competence kicks in. Lilley spends a goodly proportion of his piece writing about financial services passporting, and a little about services, but nothing about non-tariff barriers.

Yet it is not possible to talk sensibly about Brexit options without discussing how this issue is going to be addressed. Trying to do so is like acting as if the Single European Act, the "completion of the single market" by 1992 didn't exist.

That, albeit unspoken in Lilley's current piece, is actually part of his scenario. He would have it that other countries can trade with the EU without being members of the Single Market, so there is no reason for us to remain in it.

The point he evades is that most other countries have some form of trade agreement with the EU, agreements that suit their own trading situations. The UK is in the Single Market – that is our "trade agreement" with the EU. If we leave it, we need to negotiate an alternative, and one that gives us access to Member State markets on much the same terms.

But that is not in the Lilley scenario. He would have us, in his own words, bring the issue to a head before the French, German and Dutch elections. That means concluding our exit settlement by April next year – one month after Mrs May plans to invoke Article 50.

His whole scenario isn't just unrealistic. It's plain stupid. And this is from an MP who sits on the Brexit Select Committee, supposedly scrutinising the Government's plans. On this form, he isn't even qualified to scrub the floors in the committee room. For that, you need an NVQ – more of a qualification than is necessary to become an MP.

Richard North 01/12/2016 link

Brexit: a Damascene conversion


So opposed to the "Norway option" was Peter Wilding, director of British Influence, that in February of this year – well before the referendum - he invited the Norwegian Europe minister, Vidar Helgesen, over to the UK to tell us how awful it was.

We got the usual low-grade BS from Helgesen, with him telling us that British Eurosceptics often say the Norwegian experience is evidence of how a country outside the EU, but enjoying the benefits of the single market through membership of the EEA, can prosper without having to commit itself to full membership.

Helgesen, on the other hand, said that this arrangement often created frustrations and difficulties, which meant Norwegian ministers and officials spent a lot of time – sometimes without success – trying to find out what was going on in EU meetings that would affect their country directly.

"We [Norway] are fully integrated into the EU single market as members of the EEA, but what we don't have is the right to vote on those regulations that are incorporated into our law when they are made by the council of ministers", he added.

On occasion, Brussels has sprung surprises that the Norwegians could not predict. The same kind of frustrations could well face the UK. "You would not have all those Brits staffing the commission where the decisions are made", said Helgesen. "Britain being on the outside would obviously not have that amount of people on the inside. You would find it more difficult, as a result, to affect the regulations".

On the back of this, Wilding roundly declared: "Eurosceptics who peddle the myth that Norway is the best [model] for a non-EU Britain are deceiving the British public. They say leaving leads to more democracy and security. This is nonsense".

In full spate, Wilding then said: "We now have the Norwegian Europe minister himself telling us to get a grip, get real and get involved in shaping Europe. Little England cannot be an option".

But now, a mere eight months later, this same Mr Wilding is so convinced of the merits of belonging to the EEA that he is preparing a legal challenge to the government to decide whether it can withdraw from it.

Wilding's rabidly "remainer" campaigning platform has now morphed into a "pro-single market think-tank" and has hired lawyers to argue that leaving the EU does not automatically take Britain out of the European Economic Area (EAA), in which the single market operates.

They will claim that the decision to take the additional step must be decided by parliament separately from any vote to trigger Article 50, the mechanism for exiting the EU.

British Influence has written to David Davis informing him it is seeking a judicial review of that position. It warns that the government may be in breach of the law if it seeks to take Britain out of the EEA along with the EU without clear legal justification.

"We believe the government has not understood how we leave the EEA, and has not understood that we do not need to leave the EEA in order to respect the red lines the 23 June referendum established", Wilding says. "This is not about stopping, thwarting or delaying Brexit, but getting a smarter Brexit that delivers for the UK and doesn’t destabilise the continent of Europe".

Interestingly, British Influence invokes Liechtenstein, saying that it has used some provisions of its EEA membership to limit free movement of people. Its lawyers will argue that Britain could also use these provisions to satisfy the demands of those who voted for Brexit to limit immigration.

The argument hinges on whether Britain joined the EEA as a member of the EU or in its own right. Lawyers are focusing on the case of Croatia, which acceded to the EEA nine months after joining the EU, to prove that the two entities are separate.

They will argue that to leave the EEA, Britain must separately trigger Article 127 of the EEA agreement, in addition to Article 50. Article 127, which Wilding calls "a game changer", requires members to give 12 months' notification to leave without reference to Article 50, while Article 128 says that countries acceding to the EU "may" apply to join the EEA but are not compelled to.

Actually, this argument is very thin indeed, making this a false move by Wilding. We dealt with it at length in October, arguing that the EEA Agreement was quite evidently a treaty between EU Member States and Efta States. To be a party to the Agreement, the UK must either be a member of the EU or Efta.

Failing this, the other members can invoke Article 60 of the Vienna Convention on the Law of Treaties, and eject the UK. Article 60(2) entitles, in the event of a material breach of a multilateral treaty by one of the parties, entitles the other parties by unanimous agreement to terminate the treaty in the relations between themselves and the defaulting State.

In practice, it would be very hard for any state to participate in the EEA unless it was either a member of the EU or Efta, as the management of the Agreement is conducted via the institutional frameworks of both organisations. That would allow the parties to terminate the Agreement on the grounds of "the impossibility of performing a treaty" (Article 61), or the parties may prefer Article 62, citing "a fundamental change of circumstances".

For once, though, we're not on our own on this. The media's all-purpose "leading authority on European law has also poured cold water on Wilding's thesis. This is Jean-Claude Piris, a former head of the European council's legal service.

"The UK's withdrawal from EU will mean an automatic cessation of its membership of EEA as an EEA-EU member", he says. "In order to become an EEA member you have either to be an EU member or an Efta member". Thus, the UK would not be able to remain in the EEA unless, on withdrawal from the EU, it rejoined Efta.

The crucial point then, which would be much more interesting for Wilding to explore, is whether the UK participation in the EEA Agreement would then automatically lapse, requiring the government to re-apply, or whether we could claim continuity.

In the latter event, this could be very helpful as the UK could then unilaterally invoke Article 112 (safeguard measures) to impose restrictions on the free movement of persons – without requiring the assent of any other party.

Needless to say, a Government spokesman dismissed the challenge, saying: "As the UK is party to the EEA Agreement only in its capacity as an EU Member State, once we leave the European Union we will automatically cease to be a member of the EEA".

Nevertheless, continued EEA participation is possibly the best option for a trouble-free extraction from the EU, which makes it all the more perverse that the lunatic fringe is objecting to it, and absolutely bizarre that those who most strenuously opposed it are now supporting the idea.

Welcome to the topsy-turvy world of Brexit were, as Booker ventured over the weekend, the most serious barriers to a smooth exit from the EU comes from the Tory eurosceptics – as well as their fellow travellers in Ukip.

Richard North 29/11/2016 link

Brexit: Labour to save a Tory Prime Minister?


How ironic, Booker writes, that possibly the greatest obstacle to Britain achieving a sensible exit from the EU is that group of 60 Tory MPs who last week ganged up to oppose Theresa May's repeated insistence that we must remain "within" the EU Single Market.

According to a report on Channel 4 News, they believe that to stay in the single market would be "virtually the same as remaining in the EU", still subject to "virtually all its laws".

So blind are these hardline Brexiteers to the practical realities of what we are up against that they seem not to realise that, by leaving the EU but remaining free to trade in the Single Market as members of the wider European Economic Area (EEA), we would in fact be subject to only 5,288 of the 19,868 EU laws in force.

Far from having to obey "virtually all" the EU's laws, we would escape almost three quarters of them, leaving only those that would give us the right to continue trading within the Single Market much as we do now.

In this short piece – subject to the Sunday Telegraph's space limits Booker can't take this to the next level, point out that many of those laws – and increasingly so – originate at regional or global level and are simply handed down to the EU. In or out of the EU, we would be adopting them any way.

And yet, this is no secret. In his 2014 speech, Owen Paterson discusses these influences. He said:
As DEFRA Secretary, I was only too well aware of how these changes affect us. Many of the Single Market food standards my former department has to implement are no longer made in Brussels.

They have gone up a level and are now made by Codex Alimentarius, which reports to the UN's Food and Agriculture Organisation (FAO), in Rome. Yet we would often learn of them only after they had been handed down to Brussels and when it was too late to change anything.

This is no small matter. As well as Codex, the FAO hosts two other standard-making organisations, the Office International des Epizooties (OIE), which deals with animal health, and the International Plant Protection Convention (IPPC).

Both fix standards which are adopted by the EU as Single Market legislation, only then for it to be passed back down to us. Once they are set at international level, Brussels does not have the power to change them.

I was particularly struck on a visit to New Zealand 18 months ago how my counterparts saw how vital it was to build alliances and work with like-minded nations to promote legislation or amend other countries' proposals.

At that time they were particularly exercised about a specific proposal on the OIE affecting the sheep industry crucial to NZ farmers. They were particularly pleased to have got the Australians on side and believed that gaining the support of Canada and the US would see a key amendment through.

When I asked why they had not asked for the UK's influence on this matter, they said that the UK's position was entirely represented by the EU: even though we have one of the largest sheep flocks in the world.

I left feeling stung by these comments and totally disheartened by our lack of influence but also galvanised by the belief that we could serve our own industries so much better if we, as a sovereign nation, retook our rightful place on these various global regulatory bodies.

Similarly, Norway's position is abusively dismissed as simply submitting to EU law by fax machine. Norway is a member of the EEA, the area of the 28 EU member states and the three EFTA states. Norway has a huge fishing industry and plays an enormously important role in promoting regulations concerning fish in Codex.

The fact that when a regulation is finally agreed, it is formally disseminated to all members of the EEA including Norway, is wholly irrelevant to their key role in negotiating the detail alongside the EU.

Once the regulation is agreed at international level by Norway and the EU it cannot be changed by the EU. Norway makes representation to Codex by itself, and the UK could do the same. These are regulations we will need to submit to either way, so why not submit to them having had a decent chance to influence them as Norway does?

The range of international standards shaping the Single Market acquis is staggering. In the all-important car industry, for instance, the regulatory focus has moved from Brussels to Geneva. There, the EU's Single Market standards start as "UN Regulations" produced by the World Forum for the Harmonisation of Vehicle Regulations. Known as WP.29, it is hosted by the United Nations Economic Commission for Europe (UNECE).

European vehicle production is extraordinarily integrated; the UK produces 1.6 million cars but produces 2.6 million engines. Most of these engines are exported to Europe. As we move to world standards of vehicle production we would be at a massive advantage if we were directly represented, on the body influencing standards, in our industry's interest.

Then there is the regulation affecting the financial services industry - which is of such great importance to the City of London. In the past, much of this was made in Brussels. Now, most of the important rules come from the Basel Committee on Banking Supervision.

As important is the Paris-based Financial Stability Board (FSB), chaired by Mark Carney. Founded in April 2009 by the G20 and working with the OECD, it has a mandate to coordinate national financial authorities and international standard-setting bodies. It is also tasked with developing and promoting the implementation of effective regulatory, supervisory and other financial sector policies.

In the past, Ministers had to travel to Brussels to make their case, and to keep an eye on new laws, but with the advance of globalisation we now need to be represented in Geneva, Paris, Berne, Rome and elsewhere.

Outside the EU, we would be working directly with these organisations, building alliances with likeminded nations, deciding the rules the EU is obliged to adopt – as do Norway, New Zealand and the United States.
This is an optimistic and realistic view, but it says much of the "Tory 60" that they wilfully ignore what comes from their own kind.

Yet, as Booker writes, any of their suggested alternatives would in one way or another be an economic disaster. Furthermore, we could hope to gain other advantages, including the right to exercise some control over immigration and no longer being subject to the European Court of Justice.

A further irony is that, if Parliament is given a vote and those 60 Tory MPs choose to oppose Mrs May's wish to remain in the single market, she might be saved by all those Labour MPs, led by Jeremy Corbyn, who want us to stay in it.

On October 28 1972, also faced with a backbench rebellion by Eurosceptic Tories, Edward Heath only won his crucial vote to take us into Europe with the aid of 69 Labour MPs, led by Roy Jenkins, who rebelled against their own party to support him.

After Labour MPs helped overcome a rebellion to take us into Europe, it could be Labour MPs enabling Mrs May to survive a Tory rebellion over the best way to take us out.

Richard North 27/11/2016 link

Brexit: confusion upon confusion


One accepts that Brexit negotiations present special problems for the Government, so no-one is arguing that the refusal to give a running commentary is unreasonable.

On the other hand we are, in theory at least, a democracy. That requires Government to seek a broad mandate for any action it proposes to take, to which effect it needs to hosting what amount to a national conversation.

Over the past five months, however, the Government has been noticeably absent from that process, opening the way for a torrent of (largely ill-informed) medial commentary, bolstered by politicians and pundits who have been doing little more than parading their ignorance sowing the seeds of confusion.

Now, and not for the first time, we have the Brexit minister himself, David Davis who, according to the Financial Times (and many other media sources), is piling confusion on confusion over whether or not the Government intends to keep us in the Single Market.

In Strasbourg, briefing MEPs, Davis is claimed by Manfred Weber, chairman of the centre-right European People's party, to have said that Britain wanted to stay in the Single Market. Yet Downing Street is still insisting that the Government has not changed its "opaque" position.

Thus, we have a key minister apparently being quite specific about Government intentions, while all we are getting from the centre is the anodyne "trading relationship that allows UK companies to trade both with and within the single market".

The one possible mitigating factor is that Mr Weber may have been confused by Mr Davis's "circumlocution", brought about by an intention to keep Britain's EU negotiating partners guessing on exactly what line the UK will take.

However, Mr Weber has confirmed that he has been told that the British government, as far as the economy is concerned, wants to stay in the Single Market, but he did add: "What we expect are clear proposals. Today in my talk with David Davis, unfortunately I have not heard anything new. I have not received any new information: quite the opposite is true".

To my mind, this "dance of the seven veils" – redolent of David Cameron's game-playing over the date of the referendum – is now going too far. There is a world of difference between a "running commentary" and outlining the general direction of travel. That, we are entitled to know.

The absurdity of the Government's current stance is that, once Article 50 is invoked, Mrs May is going to have to present the European Council with its broad proposals for an exit settlement, so that it can respond with its "common position". If the Government keeps this up, therefore, the European Council will be told of the UK intentions before we the people know what is intended for us.

There is, of course, the added complication of the Supreme Court appeal, which must constrain the Government – until the verdict is published. But, again, this should not stop the government setting out les grandes lignes, allowing us some insight into official thinking.

What is behind this, at the moment, is a lack of confidence that the Government has got a grip of the issues, and is capable of stitching together a coherent exit plan. MPs and other politicians in public have shown little understanding of what is involved, so we have good reason to be concerned that the official position may also be lacking.

The trouble is that, if the Government really doesn't know what it's doing, it will be too late to find out when the formal talks get under way. There is little enough time as it is, and little chance of recovering from a false start.

Nor really is there any sense in the Government being too close-mouthed about its negotiating position. In truth, the options are very limited and, if the "crazies" are kept out of the loop, they boil down to variations on theme of a "transitional deal".

Here, the possibilities get interesting. The Government can either go for the full Efta/EEA option or seek continued participation in the Single Market outside that framework.

If we take Mrs May at face value, though, she is not going for the "Norway option" which leaves the UK looking for a deal which, most probably, will require treaty change – the "secession treaty" to which we have referred previously.

Short of a clean break – with all the devastating consequences that that would imply – it is in fact hard to imagine a situation where such a treaty will not be needed, this requiring agreement from all 28 Member States involved, and then ratification by all of them – including the UK.

That this possibility has scarcely been part of the public debate makes one wonder whether Mrs May's advisers have fully taken on board what is needed – specifically the ratification process which may take some time and involve the risk of one or more countries refusing to ratify.

Should this option be on the table, then the public needs to be prepared for the possibility that an exit agreement with the EU Member States will not necessarily lead to our immediate departure from the EU. We might find that the UK is still a member in 2020 when Mrs May seeks re-election in the expectation of a second and full term as Prime Minister.

Of course, failure (as it may be seen) to extract us from the EU by then might have a considerable impact on the Conservative's electoral prospects, with completely unpredictable consequences. One cannot see Mrs May being happy about this.

And, perhaps, this is the real reason why we are not being told anything about Mrs May's plans. Faced with the task of making Brexit mean Brexit, it could just be that she simply hasn't yet worked out how to break it to the British public that she might not deliver this side of an election.

Putting this together, it would also tend to explain the near-suicidal determination of the "Tory 60" to engineer a clean break. Doubtless, they know too well the potential risks in not delivering on time, and perhaps have judged that a rapid exit is worth the cost, especially if they judge that the adverse effects will not be felt until after the election.

Buying time, therefore, might seem the least-worst option for Mrs May, keeping us in the dark until she has been able to work out a narrative that will not risk costing her the election. But the longer she delays in revealing her hand, the more likely it is that she will see an erosion of confidence, and the loss of trust that goes with it.

Mrs May's best bet, therefore, might be to commit to the Efta/EEA option and get negotiations with Efta under way as soon as practicable. And if that puts her at war with elements in her own party, she can probably rely on the Labour vote to carry the day.

In this, she might recall Ted Heath, in the all-important vote in the House of Commons on 28 October 1972, to join the EEC, relied on the votes of 69 Labour pro-marketeers to get his majority. Without their support, entry would have been rejected by 36 votes.

How fitting it will be if the votes of pro-EU Labour MPs are instrumental in getting us out.

Richard North 23/11/2016 link

Brexit: CBI noise


CBI president Paul Drechsler kicked off proceedings yesterday, addressing "one thousand business leaders at the Grosvenor House Hotel".

On the need to mitigate economic uncertainty on Brexit, he said: "When it comes to negotiations, no-one understands the need for discretion better than business. We're not asking for a running commentary - but we are looking for clarity and – above all – a plan.

Drechsler conceded that there had been "encouraging signs". The Government, he said, "has set a deadline for triggering Article 50. It's given guarantees on EU funding programmes that have already been allocated. And it's offset uncertainty around Brexit with greater certainty on Heathrow and Hinkley Point".

"But in other areas", he complained, "uncertainty remains. Business needs to know we won't close our borders to Europe's talent, or lose our privileged access to Europe's markets". Then came the billion-dollar question: "what happens on the day after Brexit?"

"When the clock strikes midnight, and our two years' negotiating time is up? Today, businesses are inevitably considering the cliff edge scenario – a sudden and overnight transformation in trading conditions. If this happens, firms could find themselves stranded in a regulatory no man's land".

This is exactly the scenario we've been positing, and it is all very well for critics to say that we can adjust, and that there are work-arounds.

But the issue Drechsler raises is "a sudden and overnight transformation in trading conditions". That is the cliff-edge scenario which, even if unlikely, could happen and is quite evidently giving industry nightmares.

"And even if our legal obligations are clear and in place there would also be real, practical implications", says Drechsler. "Our ports, airports and logistics firms, if faced with new trading rules, could suddenly need new and potentially complex paperwork, which would take more time and money to process".

"As a result", he says, "they'd need more warehouses to store more goods on-site, and more supply roads for the vehicles waiting to deliver them. At short notice – this would be impossible. So – for many firms it's not about a 'hard' or 'soft' Brexit, but a 'smooth' Brexit, which avoids these cliff edge problems".

Some actually welcome the idea of a "hard Brexit", and regard the prospect of massive disruption as an exaggeration – an extension of "project fear". But the reality of a "hard Brexit", as we understand it, is the Article 50 talks yielding no agreement – for whatever reasons – precipitating the UK into a "WTO option" scenario.

Those who then talk about the EU "not daring" to raise barriers to trade simply do not know what they are talking about. Those barriers already exist. We are inside the fortress, trading freely with our EEA partners. By adopting the WTO option, we would voluntarily place ourselves outside the fortress. As a unilateral move, it is something we would do to ourselves.

But, the 1000-strong gathering was expecting clarity they didn't get it. All they got from the Prime Minister was: "Obviously, as we look at the negotiation we want to get the arrangement that is going to work best for the UK and the arrangement that is going to work best for business in the UK".

She then went on: "And I’m conscious that there will be issues that will need to be looked at", adding: "I understand the point that Paul [Drechsler] has made. Others have made this point, that people don't want a cliff edge, they want to know with some certainty how things are going to go forward". But, to conclude, all she could offer was: "That will be part of the work that we do in terms of the negotiation that we are undertaking with the European Union".

Starved of anything more substantive, however, the media have gone into overdrive with the idea that Mrs May was hinting at a "transitional deal".

The demand for a transitional deal has arisen, says the Guardian "because there is a severe mismatch between the two timetables that will apply when the government negotiates Brexit". Triggering article 50, it adds, "will lead to the UK leaving the EU after two years. But if the UK wants a free trade deal with the EU, as seems likely, negotiating that within two years is almost certain to prove impossible. Most experts believe this would easily take five years, or more".

To lend credence to the supposition, though, we had Mrs May's spokeswoman telling us yesterday that there is no question of the government seeking to extend the withdrawal negotiations beyond the two-year limit set out in article 50. "We will not be seeking to extend the article 50 process", she said.

It is that, more than Mrs May's comments, that effectively confirm that we are going for a transitional settlement.

As to the shape of that deal, the Guardian rightly suggests that this would be a matter for negotiation, "but the assumption in the business community is that it would be an arrangement that preserved single market membership, akin to Britain remaining in the European Economic Area. Or the Norway option, as it was called during the EU referendum campaign".

This, says the newspaper, would allow businesses to carry on trading with the EU much as they do now, "but it would also require the UK to pay into the EU budget and British firms to comply with EU regulations" – thus demonstrating that, in five months, it has learned nothing.

It then guesses at a possible duration of such a deal, suggesting that: "it is quite possible that this could last for five years, meaning that the UK would not achieve full Brexit until perhaps 2024". For businesses, it concludes, that would be a relief. "But for hardline Brexiters who want to leave the EU quickly, this would look like a betrayal".

Even as they bleat, though, potentially dangerous moves are afoot to destablise Brexit. According the Independent, Richard Branson's Virgin is to help bankroll a secret Blairite campaign to stop Brexit.

An email seen by the newspaper, we are told, highlights the scale of backing the group has already secured. It shows the campaign has been months in the planning and claims "substantial progress" has already been made, including the identification of "an excellent potential CEO".

The memo was written by Alan Milburn, who was one of Tony Blair’s closest Cabinet allies and reveals the group has heavy financial, political and corporate backing and is receiving advice and support from a host of high-level business and communications organisations.

High-profile MPs including former Deputy Prime Minister Nick Clegg and Labour MP Chuka Umunna are believed to have had contact with the group, as have celebrities such as Bob Geldof.

Freuds, a leading public relations agency that was founded by Matthew Freud, a close friend of both Mr Blair and David Cameron, is understood to have been commissioned to manage the strategy and marketing of the campaign.

To counter this new assault, the "hardline Brexiteers" need to up their game. Rather than bleating about "betrayal", they need to be pre-empting any of Mrs May's moves, and demanding to see he proposals for an end game.

It is all very well her talking (or just thinking) about a transitional deal, but someone has to ask why the CBI, having secured continued participation in the Single Market, will be keen to drop this in favour of a "free trade agreement" which will offer less access to European markets than we have now.

Longer term, what we are looking at is the possibility of each step away from the EU resulting in a deteriorating trade position. To regain the high ground, we need something inspiring, something better than we have now, otherwise the work of Branson and his pals might gain some traction.

And in this, one can be fairly certain that pushing for an economic catastrophe isn't the best option on the table.

Richard North 22/11/2016 link

Brexit: time is running out


There has been no neater comment on where we have got to on Brexit, writes Christopher Booker, than the two pictures on the cover of the current issue of Private Eye

The first, labelled "Then", showed that grandiose bus hired by Vote Leave, carrying the claim that, by pulling out of the EU, we could give an extra £350 million a week to the NHS. The second, captioned "Now", showed a clapped-out, windowless bus stuck in a field, going nowhere.

In Booker's view, our progress towards invoking Article 50 does indeed look ever more of a shambles. The real problem, as it has always been, he says, "is that so few people really understand the incredible complexity of what a successfully negotiated Brexit would involve".

That is certainly evident if we turn elsewhere to the Sunday Telegraph where we see an "exclusive account" of how: "Heavyweight Brexiteers among 60 Tory MPs to demand clean break from the EU".

These MPs, including seven ex-Cabinet ministers, are concerned that pro-EU figures in the Cabinet are fighting to soften the Government's Brexit position and are demanding that the Prime Minister pulls Britain out of the single market and customs union.

They say that only the "cleanest Brexit" can fulfil the country's referendum call to "untie ourselves from EU shackles and freely embrace the rest of the world".

This initiative coincides with the relaunch of the European Research Group (ERG), a pro-Brexit Tory body that claims it will produce "new thinking and policy ideas" for Britain's future after Brexit, as well as being "a constant reminder to ministers of the strength of Euroscepticism on the Tory backbenches".

As for these "new ideas", we are going to be waiting a long time, if a parallel piece in the ST is any guide. This is from Suella Fernandes, one of the 60 Tory MPs and vice chair of the ERG.

For her, we get the usual collection of issue-illiterate mantras, starting with the red herring of the customs union which was not even an issue until a few weeks ago, and was hardly – if at all – discussed during the referendum campaign.

The substantive issue is, of course, continued participation in the Single Market and here Fernandes claims that she and most of her Parliamentary colleagues took the referendum as an instruction to untie ourselves from EU shackles and freely embrace the rest of the world.

Fernandes also claims that it was "made clear in the referendum campaign" that remaining in the EU’s internal market, like Norway, or in a customs union like Turkey, "is not compatible with either of these commitments and doing so would frustrate the will of the electorate".

This is simply not true and these 60 have no more right than the lacklustre Vote Leave, Leave EU or Ukip to dictate the shape of the Brexit settlement. All of them consciously refused to adopt an exit plan prior to the referendum and, since that time, none of them have come up with any coherent ideas of how we manage the exit negotiations.

And that is the point that Booker makes in his column. None of the major "leaver" groups nor indeed the "remainers" were remotely prepared for the outcome.

The Remainers simply relied on their absurd Project Fear to ensure that the problem would never arise, but the Leavers were just as bad by deliberately refusing to work out any practical exit plan. Rather than come up with anything sensible, the "official" campaign believed they could wing it on vapid little make believe slogans such as the one blazoned on the side of their silly bus.

Five months later, with only four months to go before Mrs May invokes Article 50 and formally tells the European Council that we intend to leave, and here we are with the general debate no further forward or better informed.

All we can see is a dawning realisation by ministers that it really is turning out to be far more complicated than any of them ever realised, and that we have nothing like enough civil servants to cope with it all.

Booker reminds us that the Prime Minister, Theresa May, continues to keep her cards almost invisibly close to her chest, except for insisting that we must continue trading fully "within" the single market (because anything else would be a disaster), while staying hung up on how this could be made compatible with her wish to "control immigration".

This tension is why she added last week that we cannot be hoping for an "off-the-shelf" solution. Whatever she intended that to mean, there is only one way we can hope to achieve a deal that meets her primary requirement.

Only if, on leaving the EU, we nevertheless remain within the wider European Economic Area (EEA) can we hope to continue trading "within" the single market much as we do now.

But this would also allow us, outside the EU, to escape from the three quarters of its 20,000 laws that cover issues other than trade. It would even, under the "safeguarding" clauses of the EEA Agreement, give us limited control over internal EU immigration.

Whether or not Mrs May would regard this as the kind of "off-the-shelf" solution she now seems to be rejecting, its other immense advantage is that it would enable us, in the short time available for these negotiations, to focus on all those countless other issues that will need to be settled as part of our disentanglement from the rest of the EU system of government.

Look at the 35 different policy areas set out in the template for a treaty of accession to the EU and we can see just what will have to be unravelled in reverse, in the "Secession Treaty" that will be needed at the end of our negotiations. Only six of these 35 categories cover trade.

But our talks will also have to resolve the 29 other areas, such as what is to be done about our involvements in the EU’s common foreign and defence policies, its policies on justice and home affairs, our relations with the EU's 27 different agencies, and a whole host more – including, heaven help us, the unbelievably tricky questions of how we manage to extricate ourselves from the common agricultural and fisheries policies.

All this has so far been scarcely mentioned in the public debate, although it does help to explain why some are now suggesting that we may need to recruit 30,000 more civil servants just to cope with the myriad further issues needing to be resolved, including those ongoing financial commitments to the EU which, over a decade or more ahead, could amount to a staggering £60 billion.

The truth, Booker concludes, is that, in all directions, we are still hopelessly unprepared for what we let ourselves in for on 23 June. And the time left to get our act together is now fast running out.

And with that, the nonsense offered by the "Tory 60" is something we can certainly do without. As Pete observes, these people are dishonestly risking our global standing and flirting with recession on the basis of a delusion – a delusion that there is any credible alternative to continued participation in the Single Market, for the short- to medium-term.

Interestingly one person who in November 2014 saw this very clearly was Owen Paterson. "It is critical to remember, he said, that the economic Single Market and the political EU are not one and the same thing. We are perfectly at liberty to pursue participation in the Single Market without being saddled with the EU as a political project".

"Membership of the EEA", Paterson averred, "allows full participation in the Single Market without being in the EU, as enjoyed by Norway, Iceland and Lichtenstein. Those such as the CBI, who confuse the memberships of the Single Market and the EU are making a basic error and misleading the British people".

"We can leave the political project and enter into a truly economic project with Europe via the European Free Trade Association (EFTA) and the EEA", Paterson said. "We would still enjoy the trading benefits of the EU, without the huge cost of the political baggage".

And what was true then is true now. We cannot afford to be messing in the way we are doing. We need to move on. Most of all, if an "interim solution" is to be at all credible, we must define the end game. And that is something most people have scarcely considered.

Richard North 20/11/2016 link

Brexit: complications multiply as time runs out


In general, I tend to assume that European politicians are more knowledgeable about EU issues than our home-grown breed. And to watch two of the domestic species under the Andrew Neil microscope yesterday, my faith in this simplistic nostrum wasn't challenged.

The pair was housing minister Gavin Barwell and shadow minister without portfolio Andrew Gwynne. Both were questioned about the UK remaining in the EU's customs union and both managed to parade their ignorance in a fashion to which we have long become accustomed.

Gwynne, in particular, made a special fool of himself, asserting that Switzerland was in the customs union. This is a man clearly at sea, unable to tell the difference between a free trade agreement and a customs union, telling us that the customs union was "an important part of the operation of the single market".

Once upon a time, I suppose, we elected politicians to Westminster, but now we get political oxygen thieves, people who don't even know the basics – yet these are the people who would claim to have a better standing when it comes to judging the Government's Brexit plans, when Mrs May finally deigns to let us know what they are.

Nevertheless, despite my low opinion of British politicians being amply confirmed, my long-term views about the intellectual supremacy of continental politicians is also under challenge (not that I was terribly wedded to the idea).

The proximate cause is a similar confusion over the customs union idea, this displayed by Dutch Labour politician Jeroen Dijsselbloem, currently holding down the posts of finance minister for his country and Eurogroup president.

He was reacting to Foreign Secretary Johnson who has been in the Czech Republic where he revealed to a Czech newspaper that the UK would "probably" leave the customs union.

As usual, the media steps in with its own brand of ignorance – in this case the Guardian - confusing a customs union with customs cooperation and telling us that this move "is likely to alarm businesses that move goods to and from the EU as it would mean extra checks at the border".

Disinformation sprayed out by the media, though, is an occupational hazard and we have to get past that in order to confront Mr Dijsselbloem who argues that Johnson is promising the British people a Brexit deal that is "intellectually impossible" and "politically unavailable".

According to Dijsselbloem, it is "impossible" to be inside the internal market but be outside the customs union. That option, he says, just doesn't exist. On the other hand, he says, the opposite does exist. We have a customs union with Turkey but Turkey is not part of the internal market.

These gems were delivered to James O'Brien from BBC Newsnight who, showing typical form for the programme, was unable to recognise that he was being fed a diet of tosh. It was left to Andrew Neil the next day to point out that Norway is in the Single Market but not in the customs union.

Partially rehabilitating himself, though, Dijsselbloem moved on to speak at an event in London which was reported by Reuters. There, he told his audience that negotiations over Britain's departure from the EU are "very complex and are going to take longer than the scheduled two years".

In Mr Dijsselbloem's playbook, we have the British government's stance toward Brexit starting to show signs of splintering and "Europe" eager to pull together and prevent a populist backlash that could fracture the EU further. And in this scenario, he says, talks are likely to be strained and drawn out.

This, of course, is nothing new to the readers of but, when a politician gets something right, I suppose they should be applauded, even if he trails in our wake by more than two years.

Nevertheless, it was worth noting Dijsselbloem's observation that many in Europe were also unprepared for Britain's vote in June. "People make jokes about the UK not having a Brexit plan", he said, "but many Europeans didn't have a plan either".

And there lies a further hurdle to plans for a speedy exit. It is not only UK politicians who have to come up to speed, but their continental counterparts. Even if our Government gets its act together, it may well have to wait for others to catch up.

That said, it looks as if there is a suggestion of compromise from Angela Merkel on freedom of movement, once again confirming our assertion that the issue always was (and is) negotiable.

However, Die Welt is taking a less optimistic view than some British newspapers. If the British are exempted from the principle of freedom of movement and therefore the right of EU citizens to work in all Member States, "other countries within the EU will try to follow", the paper has Merkel say. "This would weaken a pillar of the EU".

From this, we are being schooled to expect that the British cannot hope for a "special position", although the German Chancellor does say that the EU should be talking about how this freedom of movement should be modified in the future.

It is not only the British who are criticizing the short period before immigrants from other EU countries are able to claim benefits, so Merkel is saying that we need to discuss the qualifying periods for rights resulting from freedom of movement.

Despite this, it is early days yet, and the parties have still to focus on the safeguard measures built into the EEA Agreement. But given the general lack of knowledge we are finding amongst politicians (and, of course, the media), it is going to take some time before we see any sense talked about this.

What is emerging, though, is a wider recognition that we are not going to be able to walk away from the EU without paying a hefty bill.

The Times is running a story headed: "£60bn divorce demand could wreck May's hopes of a deal", conveying the not altogether surprising news that Theresa May will be unable to enter Brexit talks because the EU "will set impossible demands, including the condition that Britain agrees to pay £60 billion to Brussels".

According to several officials and diplomats, the European Commission is drawing up a schedule of Britain's financial liabilities until 2020 and beyond, suggesting that the UK will have to pay between £50-£60 billion over three years from the end of next year until Britain's exit.

This, apparently, includes a UK contribution to the RAL commitment, which almost certainly means that the time period is incorrect. RAL does not become payable until the next MFF period, starting in 2021, and becomes due over the seven year period, so the phasing of payments will probably be extended through until 2027.

But news this isn't, having been dealt with in detail in Monograph 3. The conditions are hardly "draconian", as The Times suggests, and a commitment of about £60 billion over the next ten years or so is about right. Despite Vote Leave's stupidity, there never was a case where we were going to leave the EU without the Government putting its hands in our pockets.

With the well poisoned by Vote Leave's inept propaganda, though, the payments issue is undoubtedly going to be a difficult one for Mrs May to present. But sooner or later, she is going to have to break it to the electorate that there are going to be precious few savings from leaving the EU, for at least a decade, if not longer.

Given the sensitivity of the issue, one can surmise that haggling over the precise sums to be paid will absorb a significant proportion of the time available to us under Article 50, especially as The Times is indicating that Mrs May will be asked to meet all of Britain's financial commitments and liabilities as a precondition for Brexit negotiations even taking place.

How this will work out, we have no means of telling. But the EU is expecting will be aiming to have a Brexit package on the table by autumn 2018 and we are hearing from Brussels that the deal is expected to take the form of several agreements: a divorce agreement, including liabilities and issues such as policing and defence, accompanied by transitional agreements providing a bridge, lasting a maximum of three years, to a future framework.

If exit talks are completed in two years, Britain's future trading relationship must then be settled in the transitional period, during which time – one assumes – the status quo will prevail.

Yet there can be little dispute that, as the complexities involved in Brexit multiply, the idea of completing talks within two years is looking more and more uncertain. Even a transitional agreement does not solve the problem as this, in the form of a secession treaty, will require approval and ratification by all current 28 Member States.

Small wonder, PMQs yesterday got a little heated, with Corbyn challenging the Prime Minister over her lack of a published plan. Mrs May's tribal response was not encouraging, giving the impression that she is living off borrowed time.

If ever there was a political "honeymoon", that is rapidly coming to an end. Mrs May says she can deliver. Very soon, she will need to give some substance to her claim.

Richard North 17/11/2016 link

Brexit: playing catch-up


Even though it's the Guardian, it is helpful to see it reported that Ministers are pressing Downing Street to make an interim deal with the EU.

This, it appears, they want included when Government sends its formal letter to Brussels to trigger article 50 as the only way to prevent a "cliff edge" in the negotiations "that would plunge the UK into legal, trading and financial uncertainty".

As we know, external support for a transitional deal is also coming from the financial services industry, former UK diplomats and prominent Labour MPs including Hilary Benn, the chairman of the Brexit select committee.

It is, says the Guardian, argued that the "fiendishly complex issues" of financial passporting for the banking and insurance industries, the terms for access to the single market, including as many as 50 sectoral deals, the issue of continued UK payments to the EU, membership of the EU Customs Union and the possibility of negotiating a new schedule with the WTO mean a deal could not be negotiated in two years.

This, however, really does not make the case as the Customs Union is not an issue and dealing with the WTO schedules is not a problem. On the other hand, cooperation on justice and home affairs, foreign policy and defence, and issues outwith the single market – specifically the agriculture and fisheries policies – will all need intensive discussion.

Whatever the detail, though, the message is increasingly getting through. European diplomats are adding to those saying it will be impossible to reach a full deal by spring 2019 on both the terms of exit and a future relationship due to the complexity of the issues.

At least, the issue is getting an airing but, as one would expect, "hard Brexiteers" fear an interim deal is a Trojan horse that will leave the UK too closely bound with the EU.

This is the Farage madness, aligning himself with the Tory Right in insisting that the WTO option is a realistic proposition. Fortunately, the political consensus in the UK economic departments – business and Treasury – is that this would be too risky. It could mean tariffs on UK goods exports as well as of a loss of access to the EU services markets.

One minister has told the Guardian: "This may take 20 years to disentangle. Brexit is like the creation of the universe. We have had the first half hour of all the chaos and explosions. It is only beginning to come together, beginning to coalesce, but it is going to take a long time".

This is precisely what we've being saying for years but some believe that an interim deal is a way of minimising the disruption and keeping open the possibility that the UK "will never move to a further stage of complete divorce".

As such, the most likely interim deal is seen as a version of Norway's European Economic Area (EEA) agreement, but allied to changes to freedom of movement agreed across the EU. Senior figures in the EEA, we are told, are lobbying the UK to look again at this option.

Once again, though, there is confusion on the part of the newspaper. The EEA option may be useful as an interim option, but it is fully out of the EU. There are no special privileges afforded to non-EU states wishing to join the EU. They must go through the full candidature process.

As to freedom of movement, it is being suggested by EU diplomats that there is still scope to revive or develop aspects of David Cameron's EU deal on migration, negotiated in February. They highlight the right of all EU governments under existing directives to remove any EU citizen who has failed to find a job within three months.

Ministers in their public remarks are also increasingly emphasising the need for continuity and order in the exit. Simon Kirby, the Treasury economic secretary, told MPs last week: "Given the strong level of interconnection between our economies, continuity of service and an orderly withdrawal from the EU are also very much in the interests of both sides".

Sir Simon Fraser, permanent secretary at the Foreign Office until 2015, has argued that the complexity "will inevitably mean some sort of interim relationship between leaving and establishing the long-term, permanent relationship.

William Hague is yet another, according to the Guardian, who is saying it would be a "miracle" if a full deal could be wrapped up in two years.

Then we have Sir Robert Cooper, a former UK diplomat and special adviser to the European Commission. He says: "The negotiation the UK needs to have with the EU is not one that can take place over two years. It is too complex, no matter how hard you try. The number of issues that need to be negotiated are too big. The risk of a disorderly exit is very real. If I was Theresa May I would be extremely worried".

Another voice is Douglas Alexander, the former shadow foreign secretary. He is saying: "A more likely scenario as realism impinges on UK negotiation will be the urgent requirement for transitional arrangements – what in insurance parlance might be called bridging temporary cover".

Alexander believes that, "once the clock starts ticking a lot of thinking will turn to what are the terms of a temporary arrangement that would in reality last several years, and define the future relationship between the EU and the UK".

He adds: "It is incredibly difficult to envisage that even a comprehensive free trade agreement signed by Canada after seven years can be secured in two years, and even if we replicated it, the deal would exclude services making up 79 percent of the British economy".

Yet all of this is simply people coming to the obvious conclusion. There never has been the slightest chance that negotiations could be concluded within two years. The only thing left is a decision as to what interim option to go for.

Then, of course, there is that small matter of the end game – but it is probably too much to expect that all these important people start focusing on such an important issue.

Such brains can only deal with one thing at a time, and it's taken them long enough to think about interim options. Give it a couple of years and they might just get to the next stage. The question we have to ask is whether we can wait for these people to catch up.

Richard North 08/11/2016 link

Brexit: cutting through the media-think


While the media has been blathering about a "hard Brexit", all the while absolutely convinced that Mrs May was taking that path, we have maintained consistently that it was never going to happen.

This much was evident from Mrs May's first conference speech, and we said so at the time. But despite repeating it, confidently asserting that it ain't gonna to happen, the boys and girls in the media all knew better – and different. To them a "hard Brexit" was a done deal and nothing else was going to get a look in.

Now, following the Nissan announcement, they are having to eat their words, along with the Tory Boy think tanks that have been stuffing themselves with Bamford gold in exchange for telling us what a bad deal the Single Market is.

And yesterday it got even worse for them, with business minister Greg Clark telling the idiot Andrew Marr (transcript here) that the Government's negotiating objective would be "to ensure that we have continued access to the markets in Europe and vice versa without tariffs and without bureaucratic impediments".

The "demeanour of the UK Government" he added, "will be to reach a deal on access to the EU market, due to the extent to which UK industry supply chains are integrated with Europe". The aim, he said, "will be to avoid a breakdown in these talks, or a hard Brexit", then telling Marr: "We haven't made decisions yet … in terms of what we want to achieve".

Helpfully, Clark has confirmed that Nissan cannot be directly compensated if the UK fails to meet its negotiating objectives of no tariff barriers, as this would breach WTO rules. Thus, if it wasn't already clear to those with brains enough to read the runes correctly, Greg has made it abundantly clear that the EEA represents the direction of travel.

This is now so obvious that even the Guardian understands that a "hard Brexit" is a non-starter. Moreover, the egregious Wolfgang Münchau has acknowledged that "the EEA is the best of the remaining options".

This, however, is way beyond Andrew Marr who, during his interview with Greg Clark decided that, because Clark was "talking about a customs-free deal", this ruled out a "Norway-style economic deal" as conflicting with the commitment to take back control over migration.

There we have the received wisdom of the media, which has convinced itself that there can be no concessions on freedom of movement if we go for the EEA option. That's as far as it goes. The media machine has made its decision, indulging in its "media-think", its very own form of group think.

Imbued with this enhanced form of self-delusion, Marr thinks we do have another option. "We'd have to have what is called a customs union as Turkey and other countries have", he tells Clark, suggesting that this was "where we're heading".

Interestingly, Clark didn't bite, leading Marr to speculate that, if we get some deal, "something like a customs union", there would still be a gap in the service sector, "which is still the majority of our economy". Unable to reconcile this with the kind of deal that he thinks has been offered to Nissan, he ventures that: "alongside any customs union deal you would need some kind of deal to help the financial services industry".

What Marr has missed, of course, it Clark's reference to "bureaucratic impediments". It wasn't just – or even – tariffs that Nissan was worried about, but the non-tariff barriers that could interfere with their integrated supply chain.

But, like so many of his breed, Marr is completely deaf to this. Obsessed with tariffs and unable to see beyond them, his slender grasp of the issues simply does not allow him to reach the same conclusion that is now so obvious to Münchau and has been to us for three years.

That leaves the media to do what it does best: spreading confusion and misinformation. Having fixed in its collective brain that the "Norway option" is off limits, it is struggling to make the "Customs union" fit into the narrative.

Yet, if one was to ask any one of these hapless beings precisely what they understood by this term, they would most likely have trouble defining it. Even Lord Mandelson's henchman seems confused on the issue. 

But at least his master has got the story straight, emphasising that we "must keep the single market". "We are leaving the European Union because there is a mandate to do so", says Mandelson. "The terms on which we leave, however, have no clear mandate. For the sake of our economy and future growth, we should stick to the Prime Minister's original prescription and do everything we can in the first instance to find the best terms on which to continue being in the single market".

Nevertheless, the Muppets are completely unrepentant. They are so busy telling us how terrible the Single Market is that they haven't yet grasped the point that, good or bad, withdrawal has to be carefully managed. We are not arguing about whether we should leave, but how and when, and what should replace it.

It is ironic, therefore, that William Keegan in the Guardian is articulating a sentiment that would not be out of place on this blog, declaring that "people in high places have been shocked by the ignorance of the leading Brexiters".

Fortunately, those "leading Brexiteers" are not in the driving seat, any more than is the media. It was not, after all, David Davis with but Greg Clark, the business secretary, who has cut through the media-think and fried Andrew Marr's brain. There is no hope for Marr, but at least the Government seems to be taking us in the right direction.

Richard North 31/10/2016 link

Brexit: EU support on immigration?


In her report to the Commons on the European Council last Monday, Prime Minister Theresa May found herself complaining about the tendency of MPs to reduce Brexit to "binary decisions between either being able to control immigration or having some sort of decent trade arrangements".

"That is not the case", she said: "We are going to be ambitious for what we obtain for the United Kingdom. That means a good trade deal as well as control of immigration".

And now, it would seem, there are stirrings in the brush which may indicate that Mrs May has a far stronger hand on controlling immigration than has been imagined, with allies who may be willing to support her when the chips are down.

The clue lies in a recent report in Hungary Today of a multi-national manpower survey, which had 57 percent of Hungarian employers having trouble filling positions.

Of this, 32 percent were struggling with a lack of applicants for the vacant positions while 31 percent complained of a shortage of skilled labour. Overall, the shortage of skilled labour in Hungary exceeded the global average by 17 percentage points.

Furthermore, there is no doubt as to the reason for this shortage. Hungarian employers are finding that they not only have to compete for skilled employees with domestic competitors but with employers from western Europe and other surrounding countries.

The most significant disadvantage in this competition is the low payment Hungarian companies offer, but there has been a reluctance to increase rates for fear of risk competitiveness. But now the shortage of skilled labour has increased so significantly that it, too, endangers competitiveness.

Thus, while Hungary may toe the line in public, when it comes to supporting the "colleagues" on concessions over freedom of movement, behind the scenes there may well be some support for restraints imposed by the UK after it leaves the EU.

Nor is Hungary alone. Only last year, we were being told that desperate Polish authorities were trying to encourage the hundreds of thousands of workers who moved to the UK to return home amid fears a brain drain is leaving the country short of talent.

With the UK having become the top destination for Polish emigrants, the Warsaw government had set up a Powroty (Returns) programme, and in 2015 launched an internet portal aimed at persuading back the army of well educated and skilled workers who had flocked to the UK. Officials feared they were losing much needed talent and are now trying to provide new opportunities for their expats if they return.

The same year, the Guardian was telling a joke about Bulgarians: three Bulgarian men, dressed in traditional Japanese costume and armed with swords, were walking down a street in Sofia. A passer-by asked them what they were doing. "We are the seven samurai and we want to make this country a better place", the men said. "Why are there only three of you then?", the passer-by asked, "The other four are all working abroad", they replied.

Written by Bulgarian Ivan Krastev, he went on two write that mass emigration of people, mostly aged between 25 and 50, had dramatically hurt the Bulgarian economy and its political system. Businesses were complaining about a shortage of qualified labour. Bulgaria's health system had been deprived of well-trained nurses who could earn several times more by taking care of a family in London than working at a low-paid local hospital.

More recently, we have seen an obscure protest party in Lithuania with just one MP in parliament storming to power in a shock general election victory after pledging to tackle the country's emigration crisis.

Hundreds of thousands of Lithuanians had been lured abroad by higher wages in an alarming "brain drain" that has seen the population plummet to less than 2.6 million It has lost more than 370,000 people - of which roughly half had gone to Britain - since the eastern European country joined the bloc in 2004.

But concern has been evident for more than five years with President Dalia Grybauskaite in 2011 telling the Irish Times: "We are a small nation, and we are losing the most active people between 25 and 40 years old after we have trained them and invested in their education. It is a huge loss".

With a declining population, emigration is now considered to be the most urgent national problem and it is thus unsurprising that the issue has gained so much political traction.

It is not only politics that might work in our favour, though. A crucial driver of migration has been the ability of workers here to send remittances home – worth €13.2 billion in intra-EU flows in 2014. But with the current weakness of the pound, this is becoming less attractive for migrants to Britain.

There is also some sense that economically, after years of recession, the EU-27 are turning the corner, with optimistic forecasts projected for the Autumn Economic Forecast, due in November.

Part of the reason for the rush of migrants to the UK is its relatively buoyant economy, with workers coming to this country instead of Germany and other traditionally high-employment areas. But if the relative balance between the UK and mainland economies changes, there could be commensurate changes to migrant flows.

This relationship is well-proven, with Norway reporting that foreign workers are leaving the country at record levels as the economy dips into recession. Some 3,500 Poles have left Norway, with net losses also experienced amongst migrant workers from Sweden, Lithuania and Germany.

All of this points to the distinct possibility that, when it comes to the Brexit settlement, the "colleagues" may be prepared to tone down their rhetoric and start talking sensibly about immigration quotas. Already, there might have been behind-the-scenes talks, which could explain Mrs May's optimism.

But then, as we have already indicated, freedom of movement always has been negotiable. And just now, the odds of a favourable outcome are looking better by the day.

Richard North 27/10/2016 link

Brexit: no deal would be a disaster


It has recently become painfully obvious, Booker writes, that one of the greatest hidden prices we have paid for our decades of political involvement with "Europe" is the extent to which, in those 40 years, our political class has switched off from trying to understand the immense complexities of the system of government we have increasingly been ruled by. 

Daily we hear and read politicians and commentators showing that they haven't begun to grasp the reality of what we are up against, as we try to disentangle ourselves from that labyrinthine system.

Understandable though it may be that Theresa May should keep her cards close to her chest – not least because she and her closest advisers are still on a sharp learning curve as to what "Brexit means Brexit" really means – our starting point must be the single clearest clue she has yet given as to the direction of her thinking.

Our aim on leaving the EU, she told the Tory conference, must be to retain "maximum possible access to the European market", while escaping subservience to the European Court of Justice (ECJ) and regaining some “control over immigration”.

This shows that she (and her Chancellor Philip Hammond) are fully aware of what they have been told by the City and many others: that dropping out of the single market would be incredibly damaging.

Just to rely, as some wishful thinkers are still urging, on those "WTO rules" which take no account of the regulatory "non-tariff barriers" which would deny us entry to that market, would be catastrophic.

Equally it rules out any idea that, in the two years available, we could somehow negotiate a bespoke free trade deal with the EU, when all precedent shows that this would take far too long and could only give us much less than that "maximum access" to the market Mrs May spoke of.

There really is only one way to achieve her stated aim. That is for Britain to remain in the wider European Economic Area (EEA) and apply to join Norway in the European Free Trade Association (Efta).

Those arguing that this would be little different from staying in the EU are clearly unaware that, of the 19,886 laws currently in force in the EU, Efta/EEA members have only to comply with 5,288, barely a quarter, almost all concerned with trade. Nor would we be under the jurisdiction of the ECJ (although Efta's own court does choose to shadow some ECJ rulings).

In addition, although much of our immigration has nothing to do with the EU, those countries do also have some right to limit migration from within the EU; and the power to negotiate independent trade deals with countries outside the EU, as Mrs May and her ministers want.

Furthermore, we must realise that, in those two years, our negotiations to leave the EU must cover many issues other than trade. Whatever deal we reach, it will need a "secession treaty" ratified by all other EU members, not dissimilar to the "accession treaties" negotiated by countries wishing to join them.

Look on the Europa website at the template for such treaties and they cover 35 separate policy areas, such as agriculture, fisheries, foreign policy and many more, of which only a handful relate to trade.

That as much as anything shows why we need to keep the trade aspects of our Brexit deal as simple as possible, to give enough time for discussion of all those other issues; or we risk the ultimate disaster whereby we drop out of the EU without any deal at all.

Richard North 23/10/2016 link

Brexit: customs cooperation


Continuing on from my earlier piece on the post-Brexit "membership" of the EU's Customs Union, I've been doing a little more delving – all part of the ongoing research for the Monograph on the Single Market.

The indications are that the current obsession with the Customs Union started with the Financial Times in July of this year, when the paper reported that Whitehall was "split" on whether the UK should leave the EU's Customs Union.

But from the narrative offered, it would appear that this is based on a misunderstanding as to what is covered by the Customs Union. And there is  not one element of confusion but two. Firstly, there is a failure properly to distinguish between the Customs Union and the Single Market (both give tariff-free movement of goods within the EU). Then, as significantly, there is a mix-up between two separate concepts: the Customs Union and customs cooperation. Many share this confusion, including the European Commission (click the "Customs Union" entry).

The matter can be cleared up by reference to the Consolidated Treaties. There it can be seen that the Customs Union is Chapter 1 of Title II (TEU) – Articles 30-32 – while customs cooperation is Chapter 2 – Article 33. The two are very separate, in treaty law and in practical terms.

The Customs Union actually pre-dates customs cooperation which was not originally part of the EEC. The original cooperation agreement came outwith the European treaties, in the Naples Convention of 1967. That means that the Customs Union was in place ten years before formal cooperation was introduced, and then not as part of the European treaties. Until the late 80s, goods travelling from one Member State to another still required customs clearance, even though internal tariffs had been abolished.

Despite this, we are told that leaving the Customs Union would create difficulties with "customs formalities", and delays at the ports. But these lie in the domain of customs cooperation and are nothing to do with leaving the Customs Union. Customs "formalities" are defined by the Union Customs Code (UCC), which relies on Article 33 (TEU) for its authority. In this context, the Customs Union is an irrelevance.

But, while I pointed out in my earlier piece that the UK cannot pick up the Customs Union without a treaty framework, neither can it adopt the EU's UCC. This is applicable specifically to EU Member States and cannot be adapted for non EU-members.

Nor indeed does the Customs Code have EEA relevance, so the Efta states – such as Norway - have their own customs codes. Then, through Protocol 10 and Protocol 11 of EEA Agreement, the Efta states agree mutual border inspection programmes with the EU, and commit to "mutual assistance" on customs matters.

These separate Protocols are not part of the Single Market acquis, as such, any more than they are part of the Customs Union. They are, in effect, stand-alone agreements, bolted onto the EEA agreement. They are much the same as Switzerland negotiated in 1997. Along with Japan and China, the United States, where they are not embedded in free trade agreements, most major countries have separate customs cooperation agreements with the EU. This even includes India.

The point here is that, if the UK does not continue its participation in the EEA, it will have to secure a customs cooperation agreement with the EU. This can either be a separate treaty, part of the Article 50 settlement, or embedded in a free trade agreement.

Without such an agreement, there are going to be serious problems. At the borders, the core element of the UCC is Regulation 46 which specified that customs controls, other than random checks, "shall primarily be based on risk analysis".

This comes down to risk management, applied to reduce the number of border inspections, so that only the high-risk consignments are targeted and checked. But, unless we have close cooperation with the EU, effective risk management by EU customs officials is not possible.

As the Commission's guide indicates, this relies on building a "risk profile" for exporters. And to build those, customs officials must have access to a continuous flow of information which comes to them via the electronic EU Customs Risk Management System (CRMS).

This is built into the Customs Risk Management Framework, of which we are currently part. If we drop out of it as a result of Brexit, there will be no means of developing a targeted inspection programme for our exports to the EU. Inevitably, the number inspections carried out by customs officials will have to increase, with all that that entails.

Brexit, then, is far more than just dealing with tariffs – despite the Economist and all the others which seem obsessed with only that facet of our relationship with the EU. The risk of a customs logjam, flowing from a breakdown in customs arrangements, is potentially a far greater problem.

That is not to say that problems cannot be solved by negotiation. But customs cooperation is another facet which will have to be built into the Article 50 negotiations. Continuation of existing arrangements will not be automatic and, in order for agreement to be reached, there will also have to be a commitment to upgrades and developments to ensure we maintain operational compatibility in the future.

Possibly, though, there is an unexpected get-out for the UK. The original Naples Convention of 1967 was updated to become the Convention on Mutual Assistance and Cooperation between Customs Administrations of 1997 – called the Naples II Convention.

Taking its legal base from the Maastricht Treaty (Article K.3) – which formally introduced customs cooperation into the European treaties - this seems to be still in force. As the UK is party to it, the text could form the basic of a post-Brexit agreement. With a presumption of continuity, it could even carry over into the post-Brexit era.

Whatever mechanism we do chose, though, there is an urgent need for some clarity in the debate. The Customs Union is not an option but, regardless of the shape of the Brexit settlement, we will need to define a comprehensive agreement on customs cooperation.

Richard North 22/10/2016 link

Brexit: confusion reigns


David Jones, Minister of State for Brexit, has told a House of Lords committee the UK's negotiating position may not be "totally crystallised" by next spring. The government was "at an early stage of the process", he said, and thinking was "developing".

But then, if this recent report in the Guardian (and a parallel report in the Mail) is any guide, this should not come as a surprise. The debate seems to be going backwards, sowing confusion in place of clarity, adding needless complications to an already complex issue.

For a start, these two newspapers don't seem to know whether they are coming or going. Both apparently report on work submitted to the Cabinet by the Treasury, the think-tank NIESR, and the Centre for Economic Performance at the London School of Economics, but both seem to have a different idea of what it involves.

The Mail, on the one hand, has the work focusing on "a Norway-style model where the UK exits the single market but stays inside the customs union", whereas the Guardian has it that we remain "inside the single market but outside the customs union".

The Guardian then confuses the issue still further by suggesting that a customs union sets common external tariffs – which is fair enough – but then, bizarrely, asserts it "does not require customs checks".

There, we seem to have the newspaper confusing itself as both the Single Market and the Customs Union have the effect of abolishing internal trade barriers. Customs unions, traditionally, deal with tariffs - removing tariffs between members and settling a common external tariff to third countries. The Single Market goes further, abolishing qualitative and quantitative barriers to trade, between members.

There is, however, a degree of overlap, in that a free trade area (of which the Single Market is an example) also abolishes internal tariffs (in whole or part), so the main residual function of the EU's Customs Union is to set the Common External Tarriff (CET). Both the Customs Union and the Single Market require customs checks at the external border.

Unfortunately we cannot check the original reports as these do not seem to have been published, but the issues they raise are not at all helpful. Rather, they add to the more general confusion about customs unions, which should perhaps not have been raised at all in this post-referendum period.

The point is that, when there is a discussion about whether the UK should remain inside the EU's customs union, this begs the question as to whether we can do this and still leave the EU. In all probability, this is not possible. 

At issue is a rather stark problem. The EU's customs union is underwritten by a legal code which gains its authority from the EU treaties. To countries outside that treaty framework, it can have no direct effect - any more than US federal law can apply to other countries, turning an outside country into part of the United States customs area. 

There is a contrast here with the Single Market. That is also underwritten by a body of law, which gains its authority from the EU treaties. But there is also a parallel a treaty system in the EEA Agreement. Through this, the EU Single Market acquis can be transposed into EEA law and thereby apply to to non-EU members (as in the Efta states). Thus, it is possible for them to participate in the Single Market and not be a members of the EU. They do not obey EU law. They obey EEA law. 

As regards the EU's Customs Union, there is no parallel treaty system by which EU law can apply to countries outside the EU. Therefore, there is no mechanism by which non-EU members can adopt Customs Union law, and become active members of the Customs Union with a common customs area.

By all means, we can agree a separate customs union with the EU (once we have left the EU), as have Turkey, Andorra and San Marino. But these are customs unions between the EU and third countries. That is not the same as being part of the EU's customs union. Its customs union was embedded in the founding treaties and carries through to the current EU treaties (Article 28 TEU). 

Article 28 states: the European Union "shall comprise a customs union". The customs union is an integral part of the EU – with duties collected paid to the EU, which become part of its income. To be in the customs union, you have to sign up to the EU treaties. To add non-EU members would require in all probability the EU treaties to be amended. And it is hard to see that happening. It is hard to see how that could happen.

Furthermore, the Union Customs Code - which is the key executive instrument of the customs union - is also applicable only to Member States. There are 97 references to Member States in the Code, imposing rights, duties and obligations. The Code could not easily be made to apply to third countries: it would impose obligations which would have no legal force on parties outside the EU treaties.   

Nevertheless, if for the purposes of argument the Code was adapted to allow continued UK participation, it would still be judiciable by the ECJ and would remain so. Unlike the Single Market, there is no separate court for non-EU members, such as the Efta Court, to adjudicate on the specific body of law. If the UK wanted to stay in the customs union, it would have to accept ECJ jurisdiction, post-Brexit.

Doubtless, that would keep the UK so closely embedded in the EU institutions that it would be hard to argue that we had completely left the EU. Contrary to EEA membership – where Efta states are decidedly not in the EU – UK membership of the customs union might make it only a semi-detached member. It is unlikely that that could be taken as fulfilling the referendum mandate.

Yet, perversely, this whole issue has only emerged after the referendum. I certainly don't recall discussing the customs union during the campaign – certainly not in any depth – and had always regarded it as a non-starter. All it is doing now is adding to the confusion. The sooner it drops out of the discussion, the better. 

There is no real prospect of the UK remaining in the Customs Union, and neither would we want to.

Richard North 20/10/2016 link

Brexit: off the edge of a cliff


If he was a little brighter, Nick Clegg, he would already know that a "hard Brexit" was not on the cards. But then, he is a politician, and a Liberal-Democrat, so we can't expect too much of him.

Nor can we really complain that he didn't see the result of the referendum coming – after all, we didn't either. Had he done so though, he and his fellow remainers might have hedged their bets and been more cautious about rejecting the idea of the EEA as an interim option.

But now he's telling us that leaving the EU and taking the "soft Brexit" option of joining Norway as a member of EFTA, is a credible alternative after all. And it's much better then exiting without any alternative trading relationship in place and relying instead on WTO rules.

The most important decision of all, Clegg says, is whether to remain a member of the Single Market, where we benefit from zero tariffs and can help to shape the harmonised non-tariff rules that ensure that goods and services can flow smoothly across borders.

Clegg is unequivocal on this. "It is completely possible to be a member of the Single Market while standing outside the EU: Iceland, Lichtenstein and Norway all do so".

Sadly, though, instead of pushing for precisely that option, Clegg has decided on the "scare" route of telling us how awful a "hard Brexit" is, in this instance telling us how badly the food industry will be hit. And he tells a good enough tale although, being a politician briefed by prestigious people, he doesn't grasp the full horror of it all.

In his accompanying paper, he tells us that, at present, UK food and drink products are traded across borders with no forms or checks. Once we leave the EU, he says, products will have to go through customs checks at the EU border.

But exporters of products of animal origin (not only meat but also eggs, milk, honey, and gelatine products) will need to go through a number of additional steps.

They must register with the EU as a third country company, authorised to export animal products to the EU. They must apply for relevant import licences along with documentary proof of the product's country of origin. And they must apply and pay for costly export health certificates to show that the product meets EU public health standards.

When the shipment is ready, they must notify the relevant EU Border Inspection Post (BIP) in advance of the arrival of the goods. When the goods arrive, they must submit them for veterinary inspection and then, only at that point, after payment for the relevant checks, will the UK exporter receive an import certificate. If the consignment fails the checks, it is either returned or destroyed.

What he doesn't say very clearly is that these products may only enter the EU via a Border Inspection Post, which must be approved by the Commission's Food and Veterinary Office as having the necessary facilities to carry out inspections, to the requisite standard.

And here's the rub. Had he checked with the official list, he would have found that the major port for UK goods into France – the post of Calais – is not a registered BIP. The nearest is Dunkirk, and that only has the capacity for inspecting 5,000 consignments a year - and average of less than 15 per day.

Failing Dunkirk – which invested €2 million in its facilities - the nearest French alternatives are Le Havre or Brest, but it is unlikely that they will have much spare capacity. And to develop the capacity is going to take time and a great deal in capital investment. For a very long time, therefore, it will not be possible to export some types of food product to France.

But not only does Clegg understate the problems, much of what he does say is, in any event, going to be dismissed as a continuation of "project fear". Despite him correctly saying that two years isn't long enough to negotiate a free trade deal, already he has the lunatic fringe dismissing him as "delusional".

Clegg's intervention, therefore, is not terribly helpful. His attachment to the EEA-interim option is seen at a ploy to keep us in the EU, and there are enough stupid people out there who believe the Efta state members of the EEA are in the EU and subject to the jurisdiction of the ECJ.

Since Clegg is also pushing for a parliamentary vote on Article 50, his credentials are coming under further suspicion so, when he argues that a "hard Brexit" will bring turmoil, he simply isn't being believed by the extremists.

Not least, for a man who was quite happy to see our parliamentary democracy undermined by the EU, his latter-day conversion to the need for a greater role for parliament is a little hard to take. Thus, the chances are that the former Lib-Dem leader wouldn't be believed, no matter what he says. His latter-day conversion to the "Norway option" can only do harm.

A better stratagem, of course, would be to push for an attractive end game, swamping the negative of a "hard Brexit" with a positive. That much, though, would be beyond Clegg and his Europhile cohorts, which leaves it up to Mrs May and her Cabinet - turmoil notwithstanding.

Given probably, that there is little support for leaving the Single Market, that may not be as difficult a task as it sounds. Even now, there is everything to play for.

Richard North 18/10/2016 link

Brexit: listening to the silences


Nick Clegg, on the Marr Show yesterday argued that "There are countries outside the European Union, such as Norway, which do have greater powers of control over who comes in and out of their country, and yet they have full participation in the Single Market".

His view is, that if the United Kingdom played its cards right, it could continue to participate in the Single Market while doing a deal on freedom of movement - the best indication yet that the Liechtenstein/EEA solution in Monograph 1 is gaining traction.

This is even more the case when we have John Rentoul in the Independent directly citing the Monograph, stating:
Norway and the other countries in the EEA, the European Economic Area (Iceland and Liechtenstein), are allowed to take "safeguard measures" under articles 112 and 113 of the EEA Agreement, "if serious economic, societal or environmental difficulties of a sectorial or regional nature liable to persist are arising". EEA status, with this measure already triggered to limit immigration from the EU, has been suggested as a transitional arrangement for the UK when it leaves the EU, allowing it to remain in the single market while a permanent relationship is negotiated.
Even if he spoils it somewhere by saying: "I don't think the EU would agree to it", Mr Clegg seems to think otherwise.

And then, we see in the Telegraph the novel idea of the UK seeking the Efta/EEA option as an interim "quick fix". This is from economist Anton Muscatelli, who is not there yet on the detail, but at least they are beginning to get there.

We also get Lord Livingston, former minister of state for trade and investment, also arguing for an interim deal. "I know that trade deals aren't hard or complex", he writes. "They are extremely hard and very complex".

He then goes on to say: "They can be good, comprehensive or quick. However, they cannot be all three. The UK would suffer if it sacrificed the first two elements on the altar of a speedy exit from the EU trading system".

His interim deal, however, only last for three years, an interim agreement with the EU and he has not caught up with Clegg on the free movement issue. Nor, having discussed the idea of an interim option has the man come up with a credible end game – which is something the Government is going to have to work on.

But we do have the Financial Times which is telling us that Mrs May "has not ruled out making future payments to the EU to secure privileged access to the single market".

This is straight out of the Monograph 3 playbook, cutting through the public chatter on a "hard" Brexit, to give more substance to the idea that the Prime Minister is lining up a deal which will keep us trading with the EU on a sensible basis.

Several senior ministers have told the Financial Times that the cabinet is considering how Britain could carry on paying billions of pounds into the EU budget. "We would have to be careful how we explained it", said one minister. "But Theresa has been very careful not to rule it out". Another senior Tory said: "With Theresa, you have to listen carefully to the silences".

Keeping up contributions will allow the UK to keep in place vital access to EU markets for the City of London and other sectors, including maintaining "passporting" rights for UK financial services. It will also keep carmakers such as Nissan in the game, shielding them from the impact of leaving the EU.

It appears that these contributions are being considered during any "transitional period" between Brexit, expected in 2019, and the conclusion of any European free-trade deal, which could take many more years to agree. Says the FT: "The payments could extend even beyond that period".

With that, we get the obligatory "senior EU diplomat" who says that: "There will have to be a budgetary contribution through the transition", although Downing Street is refusing to be drawn on this, calling any debate on future budget contributions "minutiae".

Sooner or later, it is going to dawn on the series masses that the UK has, effectively, already guaranteed payments up to the end of 2020 – the end of the current Multi-annual Financial Framework (MFF). This is agreed at Head of State and Government level, and has the force of a contract. The EU would almost certainly demand compensatory payments, which would the run into the next MFF.

The big deal most certainly is going to be how to explain all this, but as the Observer reports, there are new alliances building, which support the more rational line.

Certainly, the "hard" Brexit rhetoric is getting more than a little tiresome, and the noisemakers intensify their efforts, but we can probably take a little comfort from the saying that "empty vessels make the most noise". They might care to note that happy little suggestion from a senior minister: "With Theresa, you have to listen carefully to the silences".

Richard North 17/10/2016 link

Brexit: case not made


I watched most of the Opposition day debate on parliamentary scrutiny of the Government's negotiating strategy for leaving the EU (link to follow) – led by opposition spokesman Kier Starmer.

It was an "excellent debate" according to David Jones, the Minister of State for Brexit, winding up for the government – with not a hint or irony anywhere in sight. Here was a parliament which as a collective had for 43 years supported UK membership in first the EEC, the EC and the EU, with a majority of both Houses still in favour.

Yet these born-again "democrats" are now waxing indignant about the Government's refusal to give them a vote on its negotiating strategy, prior to lodging its Article 50 notification with Brussels. We thus heard much talk of parliamentary sovereignty but, as Pete points out, the sovereignty is not theirs but ours.

In terms, it was a referendum that pushed the Government into leaving the EU. The deal is between the people and Government, with Parliament largely a bystander. And now Parliament wants to play a dominant role in determining how we should leave.

Apart from lacking the democratic credentials, however, MPs face another hurdle before they can lay claim to being champions of the people. As we have seen so many times before, scarcely any of the MPs in this debate gave any sign of really understanding the issues, or demonstrating sufficient depth of knowledge that would enable the insitution effectively to scrutinise the Government.

We had, for instance, Barry Gardiner, Labour MP for Brent North, telling us he was not in the habit of quoting the Daily Mail, but he went on to do so anyway, citing with approval an otherwise "misleading and confused editorial", which would have us believe:
… what the public voted for was simple: to regain control of our borders in order to end mass immigration; reclaim control of our laws; and stop sending billions of pounds to Brussels. None of this is possible inside the single market - which requires the free movement of workers.
Interestingly, Gardiner didn't complete the full quote, which added to this notional requirement: "full adherence to the diktats of the European Court of Justice and a vast annual membership fee".

Yet, on the basis of what he did quote, Gardiner suggested that, if the Government believes that, "the question must be asked why they will not admit that they have ruled out maintaining the access we currently enjoy to the single market".

It was left for David Jones in his winding up thus to say that: "we do not accept that there is a binary trade-off between border control and access to the single market for goods and services". We are, he said: "aiming for the best deal for Britain".

With no detail to support this assertion, though, the claim was left hanging – but it does point to the supposition that the Government believes freedom of movement is negotiable. A view floated by Philip Hammond is now becoming a consistent refrain.

In a debate where MPs were obsessed with the Single Market, though – mentioning it no less than 136 times – only one MP, Mike Wood (Dudley South) – mentioned the EEA by its initials.

Bill Cash, however, spelled it out in full, first arguing that we cannot both be in the single market and repeal the European Communities Act, "whose laws are part of the jurisdiction of the European Court of Justice".

Asked by Dominic Grieve about Norway, "a country that participates in the single market without being a member of the European Union", Cash argued that we could not remain in the Single Market because we would remain "within the jurisdiction of the European Court of Justice"- apparently unaware that the EEA has its own dispute process, centred around the Efta Court.

As to any controls on freedom of movement, this was left to Labour's Emma Reynolds, who had been talking to her constituents in Wolverhampton. But she wrongly informed us that: "within the European Economic Area Norway has an emergency brake on free movement", only then adding: "Lichtenstein has controls over it".

That is as near as we got to any discussion on the Liechtenstein/EEA solution, with the one MP who discussed it relying on "constituents" and getting the detail on Norway completely wrong – although she did manage to say: "there is a spectrum here; there is a space between no free movement and free movement in its entirety".

But then we had Stephen Timms, the Labour MP for East Ham, remarking that a number of speakers "in this very helpful, valuable debate" have suggested that the negotiations should aim, "on the one hand, for barrier-free access to the single market … and, on the other, for us to no longer apply the current free movement rules".

Timms went on to agree with this: it was "the objective we should be setting". And that was quite typical of the tenor of this "very helpful, valuable debate", one where no MP gave the slightest thought to why the House should be trusted but offered every reason why they should not.

It is ironic perhaps that we the people have an ally in government, standing between us an Parliament which would frustrate our wishes, given half a chance – or crash our economy.

The House was thus left to approve a resolution amended by Theresa May, which called on the Prime Minister to ensure that this House is able properly to scrutinise that plan for leaving the EU before Article 50 is invoked, but respected the decision of the people and did not undermine the negotiating position of the Government.

Parliament can scrutinise all it likes, but does not get to interfere with the conduct of the Article 50 negotiations. And that is the only safe way to proceed. The case for greater parliamentary intervention has not been made.

Richard North 13/10/2016 link

Brexit: not wanted on voyage


"We will seek to get the most open, barrier-free market that we can", said David Davis in the debate on yesterday's Commons statement. "That will be as good as a single market".

Needless to say, the only thing as "good" as the Single Market is the Single Market, but then Mr Davis didn't say "the". He said "a" – which is altogether a different thing.

Small wonder, according to the Independent, that British diplomats are urging European business leaders to ignore statements coming from senior UK government ministers on Brexit, relying only on statements issued by the cabinet committee, chaired by the Prime Minister. Those are the only ones to reflect the official UK policy.

That, of course, puts Fox, Johnson and Davis beyond the pale – and rightly so. But when it comes to the MPs as a whole, Matt once again gets it deliciously right, his female character telling her husband, "MPs should not have a say. They don't understand the complex issues and they vote for the wrong reasons".

From the responses in yesterday's exchanges, one didn't get the impression that there was even one MP in the House who demonstrated a grasp of the issues beyond kindergarten level, with nothing which would, in any way indicate an understanding of the nature of the Single Market.

The EU itself doesn't particularly help on this. On the Europa website, the definition refers to the Single Market as "one territory without any internal borders or other regulatory obstacles to the free movement of goods and services".

That, actually, is quite misleading, as the "one territory" implies a contiguous bloc, whereas from Greece to Iceland, and Scotland to Spain, there are multiple territories and, between some of them, quite distinct borders (as between Norway and Sweden, for instance).

The defining characteristic of the Single Market, though, is not territory, per se, so much as a group of nations which agree to be bound by a common regulatory code, with respect to trade and related matters. It is, in fact, a regulatory union, the benefit of which is that enterprises within its members are permitted to trade freely across borders with a minimum of restrictions.

Non members can, of course, trade with the group, but there is always a price to pay – either in tariffs or entry controls. The exact price varies, nation to nation, depending on the deal negotiated and the concessions agreed. But none of the deals – not a single one – gives exactly the same degree of freedom as full-blown members.

From this two crucial points emerge. Firstly, the degree of unrestricted trade must be negotiated. Secondly, whatever is agreed, short of full membership of the Single Market, the there will be more restrictions and controls than there are now.

Therein rests the crucial issue. As has so often been pointed out, the possibility of concluding a deal, de novo, to bring restrictions down to a tolerable level, within the two years afforded by Article 50 - on top of all the other issues that have to be settled - is precisely nil.

If, therefore, the Government was determined to finalise arrangements within the two year period, it is going to have to accept substantial layers of controls and restrictions of goods which, currently, are not borne by exporters. Some sectors are going to be more badly hit than others but almost all will be affected to some extent or another. And there will be an economic price to pay.

This is the reality – the inescapable reality that Government is going to confront. It either takes an interim deal, along the lines of EEA participation – with all that that entails, or it takes an economic hit. There are no other options on the table.

Yet here we are now, with MPs mouthing about wanting to have a say in the approval of the Government's negotiating stance. Says Anna Soubry, "We do want Parliament to debate… most notably whether we remain in the single market", telling the Today programme that there was a "grave danger" of the government drawing its own conclusions from the result of the referendum about the type of future relationship that Britons wanted with the EU.

While Sir Keir Starmer, Labour's new shadow Brexit minister, complains that the Government is "sidelining" Parliament, one might observe that it is sidelining itself. When you listen to them talk, there is not one that you would trust. Daily, we get better debates on the comments to this blog than we get in the House of Commons.

Lest we also forget, it has been Parliament which has approved every Community treaty put before it and, even to date, the majority in the House favour continued membership of the EU. We had no reason in the past to trust Parliament, and nothing any of the MPs currently has to offer suggests that we should trust them now.

They will get their say at the end of the process, when the Article 50 process has to be approved by Parliament, and they will have another chance if a secession treaty is agreed. Parliament will have to ratify that.

In the meantime, the less we hear from Parliament the better. An effective democratic institution requires of its members knowledge and understanding. Neither is present in the House in any abundance, so we have no need of another band of ignorati, second-guessing the decision of the people.

The MPs can line up in the lobbies, some time in 2019 and as long as they do as they are told – as they tend to do – we will be out of the European Union. Until then, they are not wanted on voyage.

Richard North 11/10/2016 link

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